New research claims the bear market won’t be over until the VIX says so.

According to the analysis of a leading VIX investment firm, the stock market has not yet experienced the capitulation that typically marks the end of the bear market.

By capitulation I mean the deep desperation that leads investors to throw in the towel and swear off stocks. While not every bear market ends in capitulation, most have. So Wall Street analysts scour the historical record for reliable indicators of capitulation.

The VIX — the CBOE Volatility Index VIX,
— reflects options traders’ expectation of the S&P 500’s SPX,
volatility over the next month, with higher levels indicating greater expected volatility. Since 1990, the earliest year for which the CBOE has historical data for the VIX, the all-time high closing price was 82.69 (in March 2020). The lowest ever closing price was in November 2017 at 9.14. It is currently in the low 20s.

A recent analysis by BNP Paribas equity strategists concludes that the VIX is a reliable indicator of market cap and therefore useful in determining whether the bear market is over. They found that the median VIX level at previous bear market bottoms was 40.5, well above the highest level of the VIX (so far) in the current bear market (which is 36.45). In addition, since the company found that volatility spikes have “on average come at the same time as the market’s trough,” they conclude that the bear market has not yet bottomed out.

The company’s argument seems plausible, as the VIX has stubbornly refused to rise during this bear market, no matter how much turmoil the market has suffered. Take what happened on December 15, when the stock market took its biggest drop in three months — with the Dow Jones Industrial Average DJIA,
dropped more than 750 points. The VIX closed just 1.69 points higher that day at 22.83. This final level is on the 74e percentile of the historical distribution of the VIX since 1990, meaning 26% of daily closes have been higher in the last 32 years. This certainly suggests that we have yet to experience the capitulation.

However, investors should not bet too heavily on this message from the VIX. The median VIX level identified by BNP Paribas at previous bear market bottoms – 40.5 – displays false precision as it is in fact the middle of a broad range.

Consider where the VIX has been at the bottom of the eight bear markets since 1990 in the Ned Davis Research calendar of bull and bear markets. It broadly ranged from 28.14 to 61.59. In two of those eight, the VIX was even lower than the levels it reached in both the spring and October of 2022. bottomed out at the market’s lows in spring or October.

This broad range is also illustrated in the chart above, which shows the S&P 500’s subsequent 12-month returns as a function of the VIX. While the average return is correlated with the VIX level, the green columns show the spread between the best and worst returns of the stock market. Any bet based on the data in this chart should be a low confidence bet.

Consider what happened during the global financial crisis. Prior to the GFC, the VIX had never risen above 40. So when the VIX rose to that level in October 2008, many of the market timers my company follows bet confidently that the bear market was at or near its end. They were wrong. Stocks continued to slide. The VIX would spike to nearly 90 in November 2008, and the bear market wouldn’t end until March, when the S&P 500 was nearly a third lower.

Also consider the idea that a spike in the VIX indicates that the bottom of the bear market is near. For each bear market since 1990 in the Ned Davis Research calendar, I calculated the number of days from the date the VIX peaked to the date the bear market ended. The average was 57 calendar days, or almost two months. While in one bear market the peak of the VIX occurred exactly on the day of the bear market’s low, in another case there were 171 calendar days (nearly six months) between the peak and the end. Again, that’s quite a wide range.

So even if the VIX had risen enough in recent days to suggest capitulation, we still cannot conclude that the bear market was at or near its end.

These observations are not intended as a criticism of PNB Paribas’ research. Since there is no agreed upon definition of what capitulation is, imprecision is inherent in any attempt to measure capitulation. This is why some analyzes have suggested that capitulation has already taken place, while others – such as the PNB Paribas study – suggest that it has not.

The bottom line is: the picture is mixed, but that’s no surprise. It will never be the case that the indicators all point in the same direction. On the one hand, it is true that if the VIX had moved much higher in recent sessions, the weight of the evidence would have tilted more to believe that the bear market is about to end. But on the other hand, such a tilt would be extremely minor.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at

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