Investment veteran Tom Lee says the worst of the recent correction in financial markets is likely already over.
In a new interview on CNBC, the founder of Fundstrat says he’s looking at the volatility index (VIX), a popular gauge of expected stock market volatility.
According to Lee, the VIX suggests that markets will not see significantly lower prices.
“What we’re looking at is the VIX spike to 60 on Monday, which is the third highest on record, and the inverted VIX futures curve, which was the steepest inversion since pre-pandemic times.
Both are starting to normalize, I think the VIX as it closes below 20… And now that the term structure of the VIX futures is no longer inverted, it means the worst of the panic is behind us.
I don’t think this means that we won’t have ripple effects because we know that there are some bulls trapped and there is still some nervousness around Iran and how much of this yen carry trade needs to go away, but I think the the worst of the selling pressure is behind us. us.”
Last week, Lee said that on the other side of the correction, the current market slump will resemble a “growth scare,” describing investors’ concerns about the health of the U.S. economy.
The investor says improving weekly jobless claims could be an indicator confirming a recovery for markets in the near future.
“Well, I think when it comes to the growth scare, investors have something they can check every week, which is weekly unemployment claims, because that was a positive surprise on Thursday, and a lot of that came from Texas.
Texas saw a big drop in weekly claims week over week. The fact that the markets reacted so positively to the unemployment benefits data on Thursday leads me to believe that this is one of the key drivers because we had better than expected claims numbers and then the market crashed.
I think the fear of growth is exactly what concerns investors.”
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