Falling VIX a 'Very Bad Sign': Market Expert

The CBOE Volatility Index (VIX), considered the measure for fear in the market, dropped to just above 20 on Wednesday. Should investors be paying closer attention to the figures? Lincoln Ellis, managing director at the Linn Group, and J.J. Burns, president of J.J. Burns & Co., shared their market insights.

“We haven’t missed much of anything, because you’re seeing a continued contraction of spreads in the corporate bond market,” Burns said.

“Your average high-yield bond is up better than the stock market at this point.”

Burns said he is invested in stocks “selectively” and said he likes the larger cap stocks that have the “ability for pricing power.”

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“And those are telecommunications,” he said. “Specifically, companies like Apple—companies that have a broad dispersion of products that people want.”

In the meantime, Ellis said the VIX falling near 20 is a “very bad sign” and a “sign of complacency.”

“The equity market had a life of its own, particularly since July,” he said. “A lot of it has to do with the dollar issue that we’re seeing again reflected in trade today.”

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No immediate information was available for Burns or Ellis.