It’s been an interesting week for stocks. Last Friday, the S&P 500 closed at 1320. Today, it’s trading at 1315 (as of midday), but that masks the up and down moves of the past week. On Monday, the index was up about a half of a percent. Tuesday, it tumbled by -1.6%. Wednesday was relatively muted, and then yesterday the market popped back up by 1.7%. Today, it’s back down by -1.2%.
Not surprisingly, the VIX Index, which measures implied options volatility and tends to move inversely to stocks, has jumped from a recent low of around 15 to 20 currently (and hit 22 back on 2/23). The current level is far from some of the panic highs reached during the 2008-09 bear market, but is notable nonetheless.
We believe that the market has most likely entered an overdue corrective phase. We certainly don’t think that means it’s time to panic; in fact, it might be a healthy development that allows the bull market to eventually resume its course. However, with geopolitical developments remaining highly fluid, we can’t rule out a more adverse outcome, either. Oil prices are a major wild card. If they soar all the way back to $150/barrel, then all bets are off.
Chart: VIX Index
