Investing veteran Tom Lee, founder of Fundstrat, believes the worst of the recent market correction has likely passed. In a recent CNBC interview, Lee discussed the volatility index (VIX), which measures expected fluctuations in stock markets, as a key indicator of market stability.
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Lee highlighted that the VIX spiked to 60 on Monday, marking the third-highest level ever recorded. This was accompanied by a steep inversion in the VIX futures curve, the most pronounced since before the pandemic. According to Lee, the normalization of these indicators suggests that the most intense period of market panic may be over.
“As the VIX starts to close below 20 and the VIX futures term structure returns to normal, it indicates that the peak of the panic has likely passed,” Lee explained. However, he acknowledged that there could still be residual effects from recent market turbulence, such as concerns about trapped investors and geopolitical uncertainties, particularly relating to Iran and fluctuations in the yen carry trade.
Tom Lee @fundstrat believes “the worst is behind us” for the market
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Lee also suggested that, despite the current market dip, the correction might eventually be viewed as a “growth scare,” reflecting investors’ anxieties about the U.S. economy’s performance. He pointed to improving weekly jobless claims as a potential sign of market recovery. Last week’s claims data, notably a significant drop in Texas, was seen as a positive surprise. Lee noted that the market’s positive reaction to this data reinforces his belief that the current concerns are largely about economic growth.
i. Tom Lee believes the worst of the recent market correction is likely over.
ii. The VIX spike to 60 and the steep inversion in the VIX futures curve are starting to normalize.
iii. Lee sees the market dip as a potential “growth scare” reflecting investor concerns about the economy.
iv. Improving weekly jobless claims, especially in Texas, may signal a recovery for the markets.
v. Despite lingering risks, Lee suggests that the worst of the selling pressure is behind us.
Lap Fu Ip – Reprinted with permission of Whatfinger News
