Since its inception in 1993, the VIX has been used to gauge fear and uncertainty in the markets. With stock and bond prices significantly influenced by investor sentiment, it’s no surprise that the VIX is closely monitored by market watchers. Every month, we look to it to inform us of future market behavior. So what can the VIX reveal to us in November 2023?
The VIX is a measure of the expected volatility in the S&P 500 over the next 30 days. It uses stock market options to assess how much volatility investors expect in the next 30 days. A higher VIX rating implies that market participants are nervous or uncertain about the direction of stocks and are therefore expecting greater price swings. Put simply, the higher the VIX, the more uncertain the stock market is.
Looking at recent years, the VIX usually tends to peak during October/November. This occurs just before the traditional year-end rally in stocks, when volatility tends to taper off. Therefore, if the VIX is still relatively high in November 2023, it could a sign of heightened risk and uncertainty in the markets. This could be spooking investors and preventing them from entering the markets, resulting in less volatility and reduced stock prices.
On the other hand, if the VIX is low in November 2023, it could be a sign of confidence in the economic outlook. When investors are less fearful, volatility tends to go down. This could actually be a sign of a stable stock market with higher price levels.
Ultimately, the VIX is just one data point and can’t provide a complete view of what will happen in November 2023. However, it is an important measure and monitoring it can give investors an idea of how the markets might behave in the next few months. Also, the level of risk/uncertainty implied by the VIX is an important factor for market watchers to consider.