This bear market rally has taken all of us for a ride. The S&P 500 is now up 11% since mid-July and I am seeing some investors relax a bit - maybe a little too much. Especially now that the CBOE Volatility Index (VIX), a unique measure of market volatility, is plumbing a 20 handle (its 20-year average). It actually dipped below that earlier this week, but is holding steady right around 20 as of this writing.
Seeing it fall below its 20-year average may be encouraging some to bring money back into the stock market, but what I'm seeing is a different opportunity altogether.
See, the VIX's value fluctuates with volatility - it falls when things stabilize and goes up when volatility rises.
The thing is, we haven't left behind all the factors that have led to so much chaos this year. Inflation is easing, but we're a long way off from where we need to be. The Fed is likely to continue bumping interest rates and being aggressive about it, and there are a lot of reasons why energy prices may suddenly spike again.
Point being, the rally we've had is probably not going to last. And that means the VIX won't stay this low for much longer.
So what we have here is a great opportunity to get ahead of the game and take a nice ride as it climbs again.
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As I said, we've enjoyed a bit of a rally, but we're not out of the water yet in terms of the overall bear market. For those who've already taken a bunch of losses this year, you may need to rebuild your portfolio in record time.
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