(Bloomberg) — JPMorgan Chase & Co. strategists have identified what they say is a near bulletproof indicator to strengthen their argument that stock markets are poised to rally.
Most Read from Bloomberg
Amazon Is Raising Base Salary Cap to $350,000 From $160,000
We’re Fine Without Facebook, German and French Ministers Say
Ottawa Declares Emergency as Protests Spin ‘Out of Control’
Meta Renews Warning to EU It Will Be Forced to Pull Facebook
Peter Thiel to Leave Meta Board to Pursue Trump Agenda
The buy signal is triggered when the Cboe Volatility Index (VIX) rises by more than 50% of its 1-month moving average, which it last did Jan. 25, according to the strategists led by Mislav Matejka. The indicator has proven 100% accurate outside of recessions over the last three decades.
“We believe that equities still offer upside, and that the cycle is far from over,” the London-based strategists wrote in a Feb. 7 note. In addition to the VIX signal they look for more gains in earnings, a bottoming in Chinese activity and say investor sentiment has become too negative of late.
Data show the VIX signal has been triggered 21 times since 1990, with the S&P 500 Index gaining an average 9% in the six months afterwards. Prior to January, the last time the indicator flashed was in November, since when stocks have fallen globally. Markets have remained choppy this week.
The only time a false signal was produced was during the 2008 Global Financial Crisis as the S&P Index was still down 33% six months later.
Most Read from Bloomberg Businessweek
The Nuclear Industry Argues Regulators Don’t Understand New Small Reactors
The Rise of the $2.5 Billion Ugly-Shoe Empire
New Airline Bets You’ll Stop in Alaska for a Cheaper Flight to Asia
Nurses Who Faced Lawsuits for Quitting Are Fighting Back
Merck’s Covid Pill Fumble Gives Pfizer Potential $17 Billion Win
(C)2022 Bloomberg L.P.