The U.S. stock market $S&P 500(.SPX)$ $Invesco QQQ(QQQ)$ hit a new high for the 30th time, and the bull market is expected to continue into next year.
Do we need to continue to hold stocks firmly? One indicator worth a look>> $Cboe Volatility Index(VIX)$
The $Cboe Volatility Index(VIX)$ index fell below 12 last month—such a trajectory has only occurred a few times since the index was established in 1990.
When we see such levels, the market is quiet. But we should not misinterpret this as "calm before the storm." In fact, individual stocks may start to outperform the market from here.
To prove this point, I looked at every historical period when the VIX reading was below 12. In fact, such situations are very rare, having occurred only 14 times in the past 30 years. The subsequent stock market returns are as follows:
Stansberry Research
Since 1990, the average annual return of the $S&P 500(.SPX)$ has been 8.7%. Buying in during periods of low VIX volatility can enhance the annual return.
After all, within six months of the VIX bottoming, the broader market has risen by 2.9%, and within a year, it has risen by 10.6%. This means that the market trend in the coming months may slow down slightly—but in the next year, we can expect individual stocks to significantly outperform the broader market and achieve double-digit gains.
Most people would consider the fear indicator of a crash to be an ominous sign for the stock market. But when we look closely at the data, history shows that it is a bullish signal for the coming year.
So, the calm of low volatility does not doom the bull market. There may still be outstanding performance next year.
This is why we need to continue to hold stocks firmly.
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