The big variations seen recently in two indexes is a positive development which could push stocks into a bull market, Markets Insider reported.
- The Cboe Volatility Index (VIX) surged by 40% on Monday and Tuesday, while the NYSE Tick Index plunged to a record-low -2,069 on Tuesday.
- Fundstrat’s Tom Lee said both developments could be bullish as they indicate stock-market panic, possibly related to warnings about the Federal Reserve among others.
- Lee downplayed the spike in the VIX as “simply a panic/reset” while the NYSE index could set up great returns moving forward.
- The strategist said that both movements are positive as bull markets ‘ride an escalator, and fall down an elevator.’
- Historical data show that the S&P 500 has a tendency to surge after a 40% jump in the VIX.
- Lee said the variations are “signs of capitulation” and investors should rotate out of tech stocks.
- Among recommended stocks are those likely to report gains post-pandemic such as travel, restaurants, and hospitality.