After finishing in the green on St. Patrick’s Day, the U.S. equity market turned a deep bloody red on Wednesday. With no end to elevated COVID-19 risks in sight and with doubts surrounding the adequacy and timeliness of assistance from Washington, the market value of U.S. common stock plunged by a deep 5.85%.

From the perspective of the U.S. equity market, COVID-19 is the worst natural disaster ever. After setting a record high on February 19, the market value of U.S. common stock has subsequently plummeted by $10.8 trillion, or by 31.2%, to its lowest close since January 30, 2017.

A prospective swelling of the U.S. government budget deficit in response to a COVID-19-inspired surge in federal spending helped to drive Treasury bond yields higher on Wednesday despite the deep selloff of earnings-sensitive securities. However, the Fed has the power to counter any unwanted climb by Treasury bond yields by purchasing Treasury bonds, which is also known as quantitative easing. It would be shocking if the Fed did not soon announce a new installment of QE. Also, to an unknown degree, the selloff of Treasuries may stem from the raising of badly needed cash by highly leveraged investors or financially stressed businesses.

Some liken the current battle against COVID-19 to a wartime situation. It may be of interest that during the World War II years of 1942 through 1945, the U.S. government’s budget deficit averaged 22.2% of nominal GDP, wherein the annual budget deficit peaked at 1943’s 30.3% of GDP. A forthcoming climb by the annual budget deficit from about $1 trillion to $3 trillion would lift the annual federal budget deficit from nearly 5% of GDP to 15% of GDP. Like the funding of World War II, the financing of the war against COVID-19 would be temporary.

The VIX closed at an alarmingly high 75.6 points on Wednesday. To date in March, the VIX has averaged 56.2 points. Since VIX’s estimation methodology was revised in September 2003, a recession overlapped each of the three earlier months when the VIX averaged more than 50 points, namely November 2008 (62.6 points), October 2008 (61.2 points), and December 2008 (52.4 points).

Nevertheless, the U.S. equity market was substantially higher one year later for 13 of the 14 months where the VIX averaged more than 30 points.

For the six months showing a monthlong average for the VIX above 40 points, the monthly average for the market value of U.S. common stock 12 months later was higher by 33% year to year, on average. For the nine months showing a monthlong average for the VIX above 35 points, the monthly average for the market value of U.S. common stock 12 months later was higher by 32%, on average.

Finally, for the 14 months showing a monthlong average for the VIX above 30 points, the monthly average for the market value of U.S. common stock 12 months later was higher by 25%, on average. For only one of the 14 months was the market value of U.S. common stock lower 12 months later. Twelve months after the VIX averaged 30.2 points in September 2008, September 2009’s monthlong average for the market value of U.S. common equity fell by 13% year to year.

February housing starts fell by 1.5% monthly but advanced by 39% yearly. However, February’s overall result masked very different monthly percent changes of a 6.7% jump for single-family housing starts and a 14.9% plunge for multifamily starts. February’s yearly percent advances were 35% for single-family starts and 48% for multifamily starts.

February’s forward-looking building permits sank by 5.5% monthly but increased by 13.8% from February 2019. However, as with starts, single-family permits fared much better than multifamily permits. For example, February’s single-family homebuilding permits grew by 1.7% from January and jumped by 23% from February 2019, while multifamily permits plunged by 18.3% monthly and dipped by 3% yearly.

March’s viewing traffic from prospective homebuyers was unexpectedly above trend in March. In addition, the year-over-year comparisons of March’s first two weeks showed that mortgage applications from potential homebuyers were up by 11%, while applications for mortgage refinancings soared by 440%.

Nevertheless, Wednesday’s PHLX index of housing-sector share prices crashed by 12.56%. The housing-sector share price index has lost 47% of its value since COVID-19-related fears first arrived following the close of January 17. The market believes that social distancing will doom 2020’s peak spring selling season for housing.

Also on Wednesday, the KBW bank stock price index sank by 8.25% to a level that was 45% under its close of January 17."

My take is to get in on the vix for the foreseeable short-term future (6-12 months), then use those proceeds to put into stocks/indexes when the time comes. The only issue I have with this is how he says this situation is unprecedented, yet he's using historical returns. This tells me the trend probably holds, but the timeline is most likely dependent on this whole situation - and since there's a good chance this whole thing lasts 18 months then I'm thinking holding vix assets for at least closer to 12 months seems more in line.