The Greek market crashed. Japan’s in a recession. Oil is plummeting. New defaults are feared. The list of scary headlines goes on and on…
And all of these fear-laced concerns have caused the Volatility Index, or VIX, to spike almost 70% higher. The VIX is known as the market’s “fear gauge.” It closed above 20 on Thursday. As you’ll see in the chart below, that’s the first time the VIX has moved that high since October’s near-10% correction in the S&P 500. It’s clear fear is dominating investors’ emotions right now…
The Volatility Index Spikes Higher
In the face of such uncertainty, I asked Teeka Tiwari, chief analyst of Mega Trends Investing (MTI), to explain how he maintains a positive outlook. Regular Daily readers know Teeka is bullish on the long-term prospects of the market. It’s due to something called the “Golden Ratio.”
[The “Golden Ratio” is a massive demographic shift that begins in 2015. Starting next year, young Americans entering their “prime earning years” will outnumber older “boomer” Americans leaving them. The result is a new wave of fresh spending surging through the U.S. economy. This surge will last 14 years. Then the ratio reverts back.]
Here’s Teeka’s advice about keeping fear at bay:
It doesn’t matter what time frame you pick—rip roaring bull market or snorting bear—there will always be negative headlines, because it’s negative news that sells.
For me, the economy and earnings growth, or the perception of future earnings growth, is what drives stock prices. If I believe that corporate earnings are headed up and valuations still make sense, then I’m going to want to be in stocks.
The Golden Ratio suggests that we are about to experience 14 years of above-average growth in GDP and corporate earnings. That’s why it’s easy for me to ride out the volatility, because I’ve pulled the camera back and looked at the entire picture, instead of just one small corner of it.
And the great news is, if I’m completely wrong or it’s “different this time,” my stop loss and position sizing will prevent me from doing myself any lasting financial damage. That’s why we constantly drive home to our subscribers the importance of proper risk-management techniques.
If you still haven’t activated the Palm Beach risk-management protocol—The Three-Legged Stool of Safety—do so right now. As Teeka mentioned, it will allow you to stay invested in the markets to enjoy new gains… while preventing a catastrophic loss of capital from ever striking your portfolio.