There’s more to the inventory market if wall street’s worry rate continues to fall below a key level, Fundstrat’s Tom Lee said on a note Friday.
The CBOE Volatility Index, known as VIX, measures investor concern and was recently traded at 20. 55 on Friday afternoon. If the index manages to fall below point 20, it would be a bullish signal for stocks, according to Lee.
“A drop below 20 takes this volatility index to pre-2020 degrees and a drop in the VIX would be a threat signal,” Lee said.
The VIX index has fallen more than 44% since its peak in late January, which was triggered by a record point of deterioration in the hedging budget as pressure on names like GameStop and AMC Entertainment led investors to undo their short positions.
To take advantage of the potential threat signal in the VIX, Lee continues to argue that investors increase their exposure to cyclical stocks that take credit for a post-pandemic economic recovery. The sectors Lee seeks are financial, energy and materials. , real estate and genuine industry, according to memo.
“While there is no guarantee that [VIX] will decrease, a motion below 20 is our benchmark for 2021,” Lee said.
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