Complacency, as measured by the low VIX, is the highest it’s been in months, as a lack of negative newsflow out of Europe and recent economic data in the U.S. has surprised investors to the upside.
Kass writes that “typically, the decline in the markets, off of a low VIX is quick and relatively severe.”
Here is what the decline in the S&P 500 has looked like the last five times the VIX have bottomed out:
This leads Kass – who calls the VIX “an uncanny forecaster of market tops and bottoms” – that a swift correction could be right around the corner. To wit, he writes: “We may be at a mini-Minsky moment right now.”