MarketWatch

What’s needed for stocks to rally is capitulation, but that could come from unexpected sources, strategist says

As Tom Lee, head of research at Fundstrat says after conversations with clients this week: “The main question is why should any investor expect equity prices to stage any meaningful gain from here, in the midst of a Fed tightening cycle and in the midst of great uncertainty around the Russia-Ukraine war, increasing stress in financial markets (UK issue tabled for now) and in the midst of massive gloom of CEOs and Americans and investors.” A scenario where the CBOE Vix index (VIX) the gauge of expected S&P 500 volatility, spikes above 40, stocks drop another 20% and there is some sort of financial accident, like a hedge fund imploding. “But this is not the only ‘capitulation’ that could lay ahead,” he argues in his latest note.