VIX Spike No Threat for S&P 500 Bulls, JPMorgan Says

(Bloomberg) -- The Cboe Volatility Index’s spike during last week’s flash selloff in U.S. stocks pushed it to levels from which the market has typically recovered, according to JPMorgan equity strategists led by Misla Matejka.

Based on an analysis of the S&P 500’s performance after the VIX spiked 50 percent above the prior month’s moving average since 1990, which happened last week, the strategists found that equities were higher more than 90 percent of the time over the next six and 12 months, outside recessions.

“In other words, one should be selling only if one has a base case of U.S. recession,” they wrote in a research note. “We do not see this coming through.”

VIX Spike No Threat for S&P 500 Bulls, JPMorgan Says
  • Outside recessions, stocks gained on average 4.5 percent three months after a VIX spike, 8 percent six months after a spike and 12.1 percent a year after.
  • Third-quarter earnings results likely to be “uninspiring” as global economic activity slowed down during the period.
  • Risk of earnings disappointments earnings outside the U.S. will likely be “much greater compared to the US earnings.”
  • NOTE: ‘Any News Is Bad News’ as Earnings Fail to Save Equity Bulls

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