Answering the unanswerable

Ok, no-one knows when the equity market will bottom, but it is worth doing a quick comparison to the 2008-2009 financial crisis to look for clues. One place to look at is the Volatility Index. 

 

What is the VIX?

According to Investopedia:

Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors' sentiments. It is also known by other names like "Fear Gauge" or "Fear Index." Investors, research analysts and portfolio managers look to VIX values as a way to measure market risk, fear and stress before they take investment decisions. 

The "fear index' is helpful to look at, because it is often when people feel less fearful that they step back into the equity market.  

 

Look at the SP500

SP500

 

Look at the FTSE 100 

FTSE

 

Look at the Nikkei

Nikkei

So, in answering the question, 'when have stocks bottomed', remember the VIX. It may very well provide the guidance for when a bottom in the equity market is finally in and when a sensible time to buy is.

 


 

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