Two sentiment stories this week. First: the Market fell and the VIX jumped, but not to levels that historically mark a buyable dip. Second: Outlook Season is underway, offering a rare snapshot of where consensus is strongest — and potentially most at risk. Here’s a quick dive into both.
VIX Says: Not Enough Fear to Buy the Dip
The VIX is an exceptional real-time sentiment indicator and consistently provides valuable signals. While it spiked during yesterday’s intra-day reversal, it’s not at a level that signals a buy-the-dip opportunity.
Key points:
- Proven track record: The VIX has the most important characteristic of a sentiment indicator: it consistently delivers useful signals. Equities have performed best after high VIX levels, though it doesn’t provide sell signals.
- Strong buy signals:
- A VIX above 35 has historically led to an average S&P 500 return of 28% over the next year, with a 90% hit rate of above-average returns.
- If you raise the threshold to 40, both average returns and hit rates improve even further.
- All horizons: While results are strongest over a 12-month horizon, even shorter horizons, like one month, show significant positive returns following high VIX levels.
- Current message: Yesterday’s VIX of 27 isn’t compelling. Historically, this level is consistent with slightly below-average S&P 500 returns and a 50/50 chance of above- or below-average performance.
Conclusion
No buy signal from the VIX. It takes at least 35 for that.
Top10 Most Bullish comment
It’s Outlook Season — that time of year when inboxes fill with thick reports from every sell-side desk, each explaining what they think will happen next year.
The cynical view is that Outlooks are largely a waste of time: they tend to say the same things, rarely predict the big surprises, and have little insight on what will actually happen.
But the pragmatic investor sees Outlook Season differently.
It’s the one moment each year when every sell-side and buy-side institution goes through the same forecasting exercise at the same time — and publishes it.
That makes it a unique opportunity to measure consensus and sentiment, not a hunt for clairvoyant forecasts.
For me, Outlook Season has always been a contrarian signal, not great reading material.
When everyone is perfectly aligned on a particular view, that view becomes fragile — vulnerable to even small disappointments.
Last year was a perfect example:
Almost every house was bullish on the US dollar.
US exceptionalism was the consensus, tariffs were seen as USD-positive…
…and then the dollar delivered one of the year's biggest drawdowns.
So the real question for 2026 is this:
Which consensus trade looks solid now — but might look ridiculous a year from today?
While we wait for this year’s Outlooks to drop, here are the Top 10 Most Consensus Positions going into Outlook Season, based on the latest data from my Buy Side Sentiment Tracker.
And one more thing:
The US dollar — last year’s consensus long — is now the least popular asset out of 70 on my list.
Maybe time to start thinking about the other side?
