Capital Markets Spring 2020

I

Buy into Fear? Navigating Through a Crisis

I • Sentiment is an important factor in assessing the state of, and outlook for, the financial markets. It can be gauged using the VIX Index, which measures the implied volatility of S&P 500 Index options

• At extremes, this so-called “fear gauge” can be a contrarian signal to investors

II

Average S&P 500 Returns After Various VIX Levels

VIX 20-30 VIX 30-40 VIX >40

III

58.0%

45.5%

Higher anxiety has been followed by higher returns

IV

31.9%

21.9%

19.3%

V

5.2%

1 Year

3 Years

VI

Source: FactSet and Alger. Data is for 30 years ending February 2020. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.

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