View from the Observation Deck

1. The VIX Index uses S&P 500 options activity to gauge investors' expectations of volatility. It represents a 30-day measure. It is often referred to as the "fear index" by the financial media.
2. The average reading on the VIX Index for the 10- and 20-year periods ended 10/31/13 was 20.22 and 20.79, respectively, according to Bloomberg.
3. As the chart illustrates, a reading below 20 is more conducive for generating gains in the S&P 500. Any significant spikes in the VIX Index usually coincides with a sell-off in the stock market (see areas shaded in red).
4. In the bull market that lasted exactly five years, from 10/9/02-10/9/07, the VIX Index averaged 16.47, according to Bloomberg.
5. In the current bull market, from 3/9/09-10/31/13, the VIX Index has averaged 21.47, according to Bloomberg.
6. The S&P 500 posted a total return of 25.3% in the first 10 months of 2013. The VIX Index averaged 14.37 over that same period. It closed 11/18/13 at 13.10.
7. With the Federal Reserve looking as though it could delay any tapering until Q1 or Q2 of 2014, there sure doesn't seem to be much fear permeating the equities markets, in our opinion.  

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance. The VIX Index (The CBOE Volatility Index^®) estimates expected volatility by averaging the weighted prices of S&P 500 puts and calls over a wide range of strike prices.

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