The CBOE Volatility Index (VIX) has been elevated over the past month, indicating a greater level of uncertainty among market participants. This is one reason why defensive sectors such as consumer staples and utilities outperformed over the past week.
Meanwhile, the broader market continues to trade in a sideways range. Typically, a period of consolidation with slowing upside momentum results in further downside over the intermediate-term. Therefore, we anticipate a higher volatility regime next year, which is why we started to raise cash and rotate into the S&P 500 benchmark (SPY). This will allow us to scale into tactical positions that show relative upside potential.
Higher Volatility Regime
Source: Cannon Advisors, TradingView data