Investing veteran Tom Lee says that the worst of the recent correction in financial markets has likely already passed.
In a new interview on CNBC, the Fundstrat founder says he’s looking at the volatility index (VIX), a popular gauge of expected volatility in stock markets.
According to Lee, the VIX suggests that markets won’t see significantly lower prices.
“The thing that we’re watching is the VIX spike to 60 on Monday which is the third-highest reading ever, and the VIX futures curve inverted which was the steepest inversion since the pre-pandemic times.
Both are starting to normalize, I think the VIX, as it closes below 20… And as that VIX futures term structure uninverts, that tells us the worst of the panic is behind us.
I don’t think it means we won’t have ripple effects because we know there’s some trapped bulls and there’s still some nervousness around Iran and how much of this yen carry trade has to unwind but I think the worst of the selling pressure is behind us.”
Last week, Lee said that on the other side of the correction, the current market dip will look like a “growth scare,” which describes investors’ concern about the US economy’s health.
The investor says that improving weekly jobless claims could be an indicator that confirms a recovery for markets in the near future.
“Well I think investors, when it comes to the growth scare side, have something they can check every week, which is weekly jobless claims, because that was a positive surprise on Thursday, and a lot of it came from Texas.
Texas had a big drop in weekly claims week-over-week. The fact that markets reacted so positively Thursday to that jobless claims numbers puts me in the camp that that’s one of the big drivers because we had a better than expected claims numbers and then the market popped.
I think the growth scare is what’s on investors’ minds.”
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