Stocks Could Be Bottoming Out? 📉🚀 Don't Miss This!
Markets
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Fundstrat’s Tom Lee points to a declining VIX index as a third indicator suggesting the bottom for U.S. stock markets is approaching. The VIX, which measures market volatility, closed below 20 for the first time since the beginning of the conflict, signaling growing investor calm. Simultaneously, U.S. crude oil futures remain near $100 a barrel, and a fragile ceasefire between the U.S. and Iran persists, impacting the Strait of Hormuz. The S&P 500 has recently achieved a seven-day winning streak. Historical data reveals a pattern: when the VIX surpasses 30, oil prices decline more than 15%, and the VIX subsequently falls below 20, stocks have historically experienced positive returns. This sequence, observed in 1991, 2002, 2003, and 2021, has yielded median forward gains of 1.3% over one month, 2.6% over three months, and 9.2% over six months. Lee’s analysis suggests a potential S&P 500 level of 7,400 within six months.
MARKETS SIGNAL A SHIFT: CONFIRMING THE STOCK MARKET BOTTOM
The recent downturn in the VIX, coupled with declining oil prices, presents a compelling third indicator that the stock market’s recent pullback has concluded, according to Fundstrat’s Tom Lee. This assessment is bolstered by a series of converging factors, signaling a potential upward trajectory for U.S. equities.
THE VOLATILITY INDEX: A KEY MEASURE
The Cboe Volatility Index, often referred to as the “fear gauge,” is a crucial metric for gauging investor sentiment. Typically, the VIX surges during periods of market turbulence, reflecting heightened anxiety and risk aversion. However, the recent decline in the VIX, closing below 20 for the first time since the war began, indicates a significant reduction in this fear-based response. Lee interprets this as a pivotal confirmation that the market’s trough has been reached.
THREE SIGNS OF A MARKET TURN
Tom Lee has identified three key indicators suggesting the stock market bottom is in. The first was the initial rise in stock prices despite negative news, a phenomenon he termed “bad news rally.” The second sign was the diminishing negative impact of the ongoing conflict between the U.S. and Iran, which, while uncertain, has become less detrimental to market psychology. The current VIX decline represents the third, and most decisive, signal.
HISTORICAL PRECEDENTS AND PROJECTIONS
Lee draws upon historical data to support his bullish outlook. Since 1990, there have been four instances where the VIX closed above 30, oil prices fell more than 15%, and the VIX subsequently dropped below 20. Analyzing these past occurrences reveals a consistent pattern: stocks delivered positive returns following this sequence. The median forward gains for stocks in these instances ranged from 1.3% over one month to 9.2% over six months, suggesting a potential upside target for the S&P 500.
SECTOR SHIFTS AND INVESTMENT RECOMMENDATIONS
Based on his assessment of the market bottom, Tom Lee has adjusted his sector recommendations. He has downgraded energy (XLE) and materials (XLB) from top picks, moving them down the rankings. Conversely, he maintains a strong preference for the “Magnificent Seven” (MAGS), industrials (XLI), financials (XLF), and small caps (IWM), positioning them as his top four investment sectors.
ECONOMIC DATA AND MARKET SENTIMENT
Current market sentiment is mixed, with U.S. stock-index futures (ES00), (YM00), and (NQ00) experiencing volatility alongside rising Treasury yields. The U.S. dollar index (DXY) is up, while oil prices (CL.1) are retreating from their highs, and gold futures (GC00) are holding steady around $4,768 an ounce. Upcoming economic data releases, including factory orders and consumer sentiment, will be closely scrutinized by investors.
INVESTIGATIONS AND EMERGING CONCERNS
Several ongoing investigations and emerging concerns are adding to the market’s complexity. The U.S. Justice Department is investigating potential anticompetitive practices within the NFL. Simultaneously, anxieties surrounding Anthropic’s AI model and warnings from Bill Ackman and Jerome Powell are prompting caution among bank CEOs. Furthermore, the S&P 500's initial decline from its record high, coupled with increased flows into money-market ETFs, reflects a shift in investor caution. The ongoing conflict in the Middle East, particularly the impact of higher energy costs, continues to be a significant factor.
Our editorial team uses AI tools to aggregate and synthesize global reporting. Data is cross-referenced with public records as of April 2026.