A potential inflection point in the market may be taking shape, according to Fundstrat’s Head of Research Tom Lee, who sees evidence that the recent bout of volatility could be fading—and that a durable bottom might already be in place.
For wealth advisors navigating client portfolios through what has been a whipsaw environment, Lee’s analysis of the Cboe Volatility Index, or VIX, offers a familiar historical analog that may warrant close attention.
Lee points to a specific pattern in the VIX that previously signaled major market recoveries in both 2008 and 2020. In each of those periods—the aftermath of the Global Financial Crisis and the pandemic-driven crash—the VIX spiked dramatically above 60 and then declined swiftly below 31.
According to Lee, this drop below 31 has historically marked the exhaustion of selling pressure and the emergence of a renewed risk appetite. On Monday, the VIX closed at 30.89—just under that key threshold—and continued falling on Tuesday to around 29. If history holds, Lee argues, this could mark the completion of a capitulation phase and the beginning of a new advance.
Lee’s base case is that the S&P 500, which remains about 12% off its recent peak despite staging a sharp 10% rebound in a single day last week, is now poised to climb back to 5,500—a level he sees as initial resistance before the index embarks on what he describes as “a new leg higher.”
For wealth managers advising clients who have been leaning on cash or defensive positioning during the recent downturn, the data may support a shift back into growth-oriented equity allocations, particularly if volatility continues to abate.
Another signal bolstering Lee’s conviction is commentary from Treasury Secretary Scott Bessent, who brings to the role deep market experience as a former hedge fund manager. In a Monday interview with Bloomberg, Bessent stopped short of making explicit market predictions, but did note that “if we measure uncertainty by the VIX, I think that the VIX spiked and has likely peaked.”
Lee interprets Bessent’s comments as an implicit signal of confidence that policy support may remain intact and that the worst of the sentiment-driven turbulence could be behind us.
In tandem with this, recent signs from the Trump administration suggest a softening stance on some of the more disruptive elements of its trade policy—another factor Lee believes supports a bullish case. On Monday, the president indicated that his administration may exempt certain Chinese-made consumer electronics from the latest round of tariffs.
He also expressed openness to policies aimed at helping the U.S. auto sector navigate the tariff environment. Lee sees these moves not only as practical market stabilizers, but also as signs that internal debate within the administration may be creating room for recalibration—something that would reduce policy-driven market shocks moving forward.
For RIAs and wealth managers, this moment may call for a re-evaluation of tactical positioning strategies that were employed to navigate heightened volatility over the last several months.
While short-term hedging and defensive allocations served an important purpose, Lee suggests the market may now be reentering a phase where long-term positioning regains relevance.
His view is that while the recovery pattern—whether V-shaped or W-shaped—remains uncertain, both scenarios offer upside potential as the underlying drivers of volatility begin to fade.
The implication for advisors is twofold. First, those who had advised clients to stay invested despite the drawdowns may find their patience validated if current signals prove durable. Second, for clients who reduced risk or exited the market entirely, the present environment may offer an opportunity to reengage in equities at a relative discount before the market resumes a broader upward trend.
Importantly, Lee isn’t discounting the challenges that remain. Macro uncertainties tied to inflation, monetary policy, and geopolitical tensions continue to present headline risk. However, his view is that the exhaustion of selling, declining volatility, and softening policy posture together suggest that the equity market may be turning a corner.
He stresses that while investors may not yet be pricing in a full recovery, the early stages of stabilization are taking shape—and that’s typically when the best long-term opportunities begin to emerge.
For RIAs managing portfolios with exposure to both equities and fixed income, the potential shift from tactical to strategic posturing raises important asset allocation questions.
Should current volatility continue to retreat and policy clarity improve, it may be appropriate to incrementally rotate clients out of overweights to cash, Treasury bills, and defensive sectors, and reintroduce risk through broader market exposure or targeted opportunities in sectors that stand to benefit from easing trade pressures.
Advisors may also want to reassess exposure to equity styles. While defensive growth and quality factors have outperformed during the recent stress period, a reduction in volatility and market reacceleration could reignite performance in cyclical and value-oriented segments.
If tariff-related tensions abate, companies in manufacturing, industrials, and consumer discretionary could see sentiment improve, particularly those with global revenue exposure that were previously penalized on trade fears.
The reopening of risk appetite may also provide a tailwind for small- and mid-cap equities, which have underperformed amid liquidity concerns and macro uncertainty. Lee’s framework doesn’t explicitly break down style or capitalization segments, but his overall equity bullishness implies a broader participation across sectors and styles if the VIX pattern he’s watching holds true.
In client conversations, RIAs may find it useful to anchor discussions around the behavioral implications of volatility, emphasizing the value of staying invested through turbulence. With the VIX serving as a proxy for fear, Lee’s analysis helps reframe the conversation: when fear peaks and begins to subside, markets historically follow with recovery.
For investors who exited prematurely or are hesitant to reenter, this framing may provide reassurance that volatility is not just a threat—it can also signal opportunity.
Finally, Lee underscores the importance of monitoring any further policy shifts from the Trump administration. He notes that while trade tensions have dominated recent headlines, any indication of a pivot or rollback could unleash a powerful relief rally, particularly if paired with broader signs of market stabilization.
Advisors who remain agile and closely attuned to these developments will be best positioned to guide clients through the next phase of the cycle.
Ultimately, Lee’s thesis is not about calling an exact bottom, but about recognizing a pattern that has historically signaled favorable forward returns. For the RIA community, the key takeaway may be that the market environment is changing—again—and that agility, discipline, and a readiness to resume strategic allocations may soon take precedence over near-term defensive maneuvers.
Whether the recovery follows a linear or jagged path, the weight of evidence is beginning to tilt toward upside, and advisors who help clients position accordingly may be rewarded for staying focused amid the noise.
