Below is a chart and brief excerpt from today's Early Look written by Director of Research Daryl Jones. 

The interesting thing about volatility is that it does have some predictable patterns. Consider the last 10 years of the VIX as an example:

  • Over the last decade, the VIX has breached 30 exactly 9 times
  • If you had bought the VIX when it breached 30, you would have made money 8 out of 9 times over the next 30 days
  • The average gain was +6% for the SP500 over those periods
  • The only time this batting average didn’t hold was in March 2020 when we were in #Quad4

As always, we play the game in front of us. Perhaps this will be the 1 out of 9 times that the SP500 loses money? Perhaps not. As a gauge of volatility, the VIX measures investor psychology. Therefore, a rapidly increasing VIX typically represents the puking (to use a scientific term) of stocks.

But as Warren Buffett famously said:

“Be greedy when others are fearful.”

CHART OF THE DAY: Returns After Investing In VIX 30 - vix30