The CBOE Volatility Index (VIX) has surged above 30 multiple times recently, signaling increased investor anxiety amid market turbulence. This index, often dubbed the “fear gauge,” measures implied volatility from S&P 500 options and has historically indicated buying opportunities when it crosses 40. Notably, Wells Fargo reports that the S&P 500 has risen over 90% of the time a year after the VIX hits this threshold, with an average increase of 30%.
In the current climate, characterized by geopolitical tensions, elevated oil prices, and concerns over a potential recession, the Nasdaq-100 has already entered correction territory, and the S&P 500 is not far behind. Investors are advised to maintain a dollar-cost averaging strategy into major index funds like the Vanguard S&P 500 ETF (VOO) or Invesco QQQ (QQQ), while also considering holding cash for potential stock purchases when the VIX reaches 40.
For long-term investors, sticking to a core strategy remains paramount, but having liquidity ready for opportunistic buys could be advantageous as the market navigates this volatility.
Source: fool.com