All three major benchmarks dropped into bear territory last year. And ever since, one big question has been on investors' minds: When will the next bull market take over? That time of market growth isn't here yet.
But some positive things have been happening. For instance, the S&P 500 has climbed more than 20% from its bear market low. And just last week, a key sentiment gauge reached its most optimistic level since pre-covid days. Does this mean it's now time to buy stocks? Let's find out.
Bull territory?
First, a word on the S&P 500's movement. Some say the gain from its low has pushed the market into bull territory. But to truly enter a bull market, another condition must be met. The index also has to reach a new high. That hasn't happened -- but it's something to watch for.
Now, let's consider the sentiment measure. I'm talking about the Chicago Board Options Exchange Volatility Index, commonly referred to as the VIX. It reflects investors' expectations for upcoming market volatility. And that means it offers us a picture of whether investors are worried or sanguine. A VIX reading of 15 or lower indicates market optimism. A reading of 30 or higher signals fear about what's to come. So, the lower the better.
Over the past month, the VIX has been on the decline. And last week, it even touched its lowest level since early 2020.
Recent market gains as well as the VIX's movement show us investors are feeling more optimistic about the market these days. But does that mean you should buy stocks now? Of course, it's great to see these positive signs, and they probably will add to your excitement about investing.
But I wouldn't necessarily sell stocks when the VIX indicates fear and buy when it indicates enthusiasm. That's because, over the long term, these phases will come and go, and it's not the best idea to buy and sell according to their predictions.
Yes, the VIX is good at forecasting general market moves. But that doesn't necessarily mean your favorite stock will move in the same direction. And even if it does, you still could lose out if you sell, for example. That stock may fall over the coming months, but it could go on to climb significantly in the years to come.
A good place to look for buying opportunities
All of this means that any time is actually a good time to buy stocks as long as you're comfortable with the company's financial situation and future prospects. The perfect place to look for opportunities right now is in the list of Fortune 100 companies. Here, you'll find many top-quality companies that are trading at reasonable prices, in many cases after declines last year.
For example, Amazon (AMZN +2.01%) trades for 2.4 times sales, lower than its average over the past five years.
AMZN PS Ratio data by YCharts.
At the same time, Amazon is making progress in its recovery after struggles with higher inflation and other economic headwinds.
Pfizer (PFE +0.70%) today trades for 11 times forward-earnings estimates, lower than big pharma rivals such as Johnson & Johnson and Merck.
NYSE: PFE
Key Data Points
Though Pfizer is set to lose exclusivity on some major drugs in the coming years, it also has plans to compensate and grow through new products. So, Pfizer could deliver growth to investors over the long term.
And those two words are key: long term. If you buy shares of quality companies and hold on for the long term, you're likely to benefit from your investments. So, yes, a falling VIX is good news. We all like to see optimism in the market. But it doesn't represent a reason to buy or sell stocks right now. That's because any time is a good time to take a close look at companies -- and discover long-term investment opportunities.
