Saying stocks will likely be higher in a couple of months is all very well, but it doesn’t mean investors won’t experience some nervy moments.
Indices often rebound after a climactic sell-off, when sentiment has become very ugly. That’s not the case right now.
Yes, sentiment has deteriorated. For example, a recent American Association of Individual Investors (AAII) poll found pessimism had hit its highest level in a year. That said, recent AAII readings have not been extreme and are not indicative of investor panic.
CNN’s Fear and Greed index, a composite sentiment measure tracking seven indicators, suggests investors are fearful, but remains shy of the extreme fear levels often seen near market bottoms.
Notably, the Vix, Wall Street’s so-called fear index, recently peaked at 25.7 before falling back to its historical average, in the low 20s. When investors get spooked, the Vix tends to hit mid-30s readings.
In other words, the bull market may be alive and well, but investors shouldn’t be surprised if more volatility lies ahead.
