Last Friday's VIX spike of 54% on the omicron variant emergence has been followed by more big moves in the Dow, but VIX history says the bull market won't end.
Traders work in the S&P 500 options pit at Cboe Global Markets Inc. in Chicago, Illinois.Lerner is looking to market history, and he sees an environment in which the patient investors will be ahead, if not in December, a year from now.
But the more important data point is the longer-term trend in the VIX history: there isn't any instance across the 19 biggest VIX spikes of the past three decades after which stocks weren't positive a majority of the time one month, three months, six months, and one year later. One month later, stocks were only up an average of 1%, but were positive 70% of the time, and the numbers get better with time.
The last time was the end of September when the financial issues at Chinese property giant Evergrande sent the global equity markets into a tailspin.The base case, Lerner says, is more of a tug-of-war until more of the news filters out and the market is able to get a better gauge on this new variant. This doesn't change his view that investors are more likely to be rewarded by sitting tight rather than sitting out the market.
"In February 2020, it was all new," Lerner said. "We didn't know how businesses would adapt, and now there is playbook. We saw they become more digital. There will be winners and losers, no matter what, but companies and consumers have adapted and will again."
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