October 2025, By AlternativeSoft

Two days after our previous post (https://www.linkedin.com/feed/update/urn:li:activity:7384901110622232576), where I warned investors about elevated volatility and urged caution, the market sent us a new signal. As of 18 October 2025, the VIX — Wall Street’s volatility index — has fallen from 26 to 20.

That drop changes everything.

At AlternativeSoft, our models show that when the VIX falls below 25, the expected annual return for investors in the S&P 500 turns positive — around +21% per year on average.

In short: when fear fades, opportunity returns.

From Risk to Reward — The Power of Discipline

In my last post, I wrote that when the VIX rises above 25%, history suggests you should sell equity exposure. That analysis remains valid. Risk management isn’t about guessing tops and bottoms; it’s about respecting probabilities.

Now, as volatility has normalized, the data tell us the opposite story: it’s time to buy. Investors who act decisively in these transitions — when fear subsides but before confidence fully returns — are often the ones who capture the best part of the next uptrend.

What the Data Show

AlternativeSoft’s 20+ years of market data confirm a simple but powerful relationship:

• When VIX > 25%, average six-month returns in the S&P 500 are –39%.
• When VIX < 25%, the expected annualized return jumps to +21%.

These are not opinions — they are probabilities derived from decades of quantitative evidence.

Tactical Allocation: The Next Move

For investors managing Tactical Asset Allocation (TAA) portfolios, the message is clear. With volatility receding, equity risk is again being rewarded. Based on our models:

1. Increase exposure to U.S. small caps. They typically outperform early in recovery cycles.
2. Maintain a reduced weighting in European small caps for now, as the region remains economically fragile.

Patience and data-driven timing are critical. Selling when volatility spikes and buying as it declines may sound simple, but executing with discipline is what separates strategy from speculation.

Following the Signals — Not the Noise

Markets will always move faster than headlines. The real edge lies in listening to the data, not the emotion. At AlternativeSoft, we design our platform to empower professional investors with quantitative insights — enabling smarter decisions across Operational and Investment Due Diligence.

As volatility cools, equities once again present opportunity. I invite investors to enjoy the continuous ride — but with the numbers on your side.

Patient discipline today creates tomorrow’s opportunities.

Learn more about how AlternativeSoft provides an all-in-one solution for both Operational and Investment Due Diligence at www.alternativesoft.com.

Past performance is not indicative of future results. For professional investors only.