This post was authored by Adem Tumerkan, Dunham's Content Writer. If you have questions concerning today's topic, please call us at (858) 964 - 0500. Hold us to higher standards.
Key Takeaways
The market appears to be panicking - but history says fear can be profitable.
The VIX is flashing rare signals seen only during major drawdowns, which offer upside potential over time.
In a historic sequence, DunhamDC U.S. (U.S.-focused strategy) triggered back-to-back equity buys on April 3 and 4, followed by DunhamDC (the globally diversified strategy) executing its own back-to-back buys on April 4 and 7 – taking advantage of the fear driven sell off.
The strategy is simple: Buy Fear. Sell Greed.
On March 18th, we wrote to you how DunhamDC was leaning in while Mr. Market panicked.
And after last week's brutal sell-off, that trend continues - because the sell-off has only accelerated as Mr. Market grows even more pessimistic.
Both our DunhamDC U.S. and global strategies have shown historic activity, continuing to buy into market fear as equity prices drop.
The yield on the 10-year U.S. Treasury note fell below 4% for the first time since October of the previous year, indicating heightened recession fears (although has since recovered).
And the pressure wasn’t just domestic. The whole is reeling.
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China Hits Back: China responded with a 34% retaliatory tariff on U.S. goods, sparking fears of a full-scale global trade standoff reminiscent of the 1930s Smoot-Hawley tariffs (read about that here). Markets are now pricing in slower global growth.
Headline Whiplash Shakes Markets: Stocks briefly rallied on reports of a possible delay - only to drop again as the White House reaffirmed its stance. Markets are reacting to headlines, and investor sentiment is hitting record lows (we covered this in our latest Saturday Morning Pour – read more here).
The VIX: History Says It’s a Time for Opportunity?
The VIX is sending historic signals often seen during major market crashes - creating potential buying opportunities for long-term investors.
Let’s break it down.
The CBOE Volatility Index - aka the VIX - is a real-time index that measures the stock market’s expectations for volatility over the next 30 days. It's often referred to as the market’s “fear gauge.”
When the VIX moves higher, it signals rising fear or uncertainty in the markets.
When it moves lower, it typically reflects a more stable or confident market sentiment.
In most cases, the VIX is inversely correlated with the S&P 500 - meaning the VIX tends to rise when the S&P 500 falls and vice versa.
And while spikes in volatility can feel unsettling in the moment, history shows that extreme fear has often paved the way for attractive long-term opportunities.
As of this writing, the VIX is at 52.16 - a level seen only during some of the most volatile periods in market history.
But let’s look at the data going back to 1990 (when the VIX was created).
Historically, when the VIX closed above 46.98:
There was a 44% chance that equities delivered a positive return of 3% over the following 90 days.
But over 180 days, the chance of a positive return increased to 75%, with an average return of 13.4%.
And over 360 days, markets posted positive returns 100% of the time, with an average gain of 35.3%.
Figure 1: Dunham 2025
Thus, while these high VIX readings are relatively rare - mostly seen during crisis periods like 2008 or 2020 - they’ve historically been followed by strong one-year equity returns.
This is what we call buying fear now, and selling later when greed returns.
The takeaway - the higher the VIX spikes, the more fear is priced in - and historically, those have been the moments that reward patient, disciplined investors.
That’s exactly what DunhamDC is built to take advantage of.
DunhamDC Continues Buying as Others Panicked and Sold
So, while Mr. Market was sprinting for the exits as trillions in value vanished and the VIX exploded higher, DunhamDC saw the opportunity.
Last week, on Wednesday, April 3 and Thursday, April 4, DunhamDC strategies made historic moves - triggering multiple buy signals and taking advantage of the market turmoil to reposition for the next potential rebound.
Some of DunhamDC’s Recent Strategic Moves:
Early March: Triggered a BUY signal as markets declined - strategically increasing equity exposure at more attractive valuations.
April: Hit a BUY trigger in response to significant market fear - then triggered another BUY trigger the very next day, increasing exposure further as the sell-off deepened.
That's a total of three trades year-to-date for DunhamDC.
Here’s a chart showing over two years of DunhamDC trades (green = buy, red = sell) and how the current DC 60/40 strategy weighting compares to the broader market (blue line):
1Market Growth represents the MSCI All Country World Index (ACWI).
And here’s where each of the four DunhamDC portfolios currently stands.
DunhamDC Allocations As of April 7th, 2025 to present
Meanwhile, DunhamDC US has already been highly active in early 2025:
January: Hit a BUY trigger during market weakness, then followed with a SELL trigger weeks later as markets rebounded.
March: Hit a BUY trigger amid early volatility - strategically increasing equity exposure.
April: Hit two separate BUY triggers in the first week alone, responding to deepening fear in U.S. markets.
That’s five trades year-to-date for DunhamDC US - unemotionally responding to volatile market sentiment.
Here’s a chart showing nine months of DunhamDC US allocation changes (green = buy, red = sell) against the market (blue line).
2Market Growth represents the MSCI USA Equal Weighted Index
And here’s a chart showing the current weightings of all four DunhamDC US portfolios.
DunhamDC US Allocations As of April 7, 2025 to present
That’s the strategy in action:
No emotion.
Buy during fear-driven selloffs.
Sell when markets get greedy and prices surge.
Why It Matters
While others panic and the VIX hits high levels, DunhamDC sees potential.
Markets are emotional. And history shows: the biggest gains often come to those who stay disciplined when others don’t.
As Warren Buffett said, “Be fearful when others are greedy, and greedy when others are fearful.”
DunhamDC is built to do exactly that.
So, what’s Next?
If the market drops more, DunhamDC will keep buying.
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
Past performance may not be indicative of future results. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There may be economic times where all investments are unfavorable and depreciate in value.
DunhamDC (“DunhamDC”) is a proprietary algorithm of Dunham & Associates Investment Counsel, Inc. (“Dunham”) that seeks to mitigate sequence risk, which poses a threat to an investor's returns due to the timing of withdrawals. The algorithm employs what Dunham considers to be a pragmatic strategy, generally making incremental increases to the equity allocation when global stock market prices decrease and decreasing it when global stock prices increase. This approach is objective, unemotional, and systematic. Rebalancing is initiated based on the investment criteria set forth in the investors application and is further influenced by the DunhamDC algorithm.
Due to the large deviation in equity to fixed income ratio at any given time, investor participating in DunhamDC understands that a large deviation in equity to fixed income ratio can have significant implications for the risk and return profile of the account. Accordingly, during periods of strong market growth the account may underperform accounts that do not have the DunhamDC feature. Conversely, during periods of strong market declines, the account may also be underperforming, as the account continues to decline, due to the higher exposure in equities. Similarly, if the fixed income investments underperform the equity investments, it is possible that the accounts using the DunhamDC feature may underperform accounts that do not have the DunhamDC feature, even though they may have adjusted the exposure to equity investment before a decline. Therefore, the investor must be willing to accept the highest risk tolerance and investment objective the account can range for the selected strategy. Please see the Account Application for the various ranges.
DunhamDC uses an unemotional, objective, systematic approach. The algorithm does not use complex formulas and is designed to create a consistent process with limited assumptions based on historical data.
DunhamDC may make frequent purchases and redemptions at times which may result in a taxable event in the account and may cause undesired tax-related consequences.
Trade signals for DunhamDC are received at the end of each trading day with the implementation of the trades not occurring until the next business day, which means that there is a one-day lag that may result in adverse prices.
DunhamDC operates within predefined parameters and rules, some or all of which may not be available to review. While this approach can reduce emotional biases and enhance consistency, it may limit adaptability to changing market conditions, economic considerations, or unforeseen events. Extreme conditions may require deviations from the program’s prescribed approach, and such adaptability may be challenging to incorporate. The DunhamDC algorithm is programmed based on specific criteria and rules, it may not capture certain qualitative or contextual factors that can impact investment decisions or movement in the markets. Beyond the initial assumptions used to develop the algorithm, it lacks other inputs or considerations that human judgement and discretion may be necessary to evaluate. DunhamDC may utilize historical data, statistical analysis, and predefined rules. It does not make any predictions and may add to certain investments before they perform poorly or may divest from other investments before they perform well. Dunham makes no predictions, representations, or warranties as to the future performance of any account.
Accounts invested in DunhamDC are subject to a quarterly rebalance to its target allocation at the time based on DunhamDC in addition to the signals provided by DunhamDC at any given time.
If the variance between any Dunham Mutual Fund’s target percentage of the total account value compared to the current percentage of the account value is greater than 1.00% at the time of the trigger point, the account in DunhamDC will be updated to the new target allocation.
Accounts invested in DunhamDC may contain non-Dunham Mutual Funds, which may materially impact if the account is being rebalanced at the trigger point.
Dunham makes no representation that the program will meet its intended objective. Market conditions and factors that influence investment outcomes are subject to change, and no program can fully account for all variables and events. The program requires making investment decisions based on factors and conditions that are beyond the Account Owner’s and Dunham’s control.
DunhamDC is NOT A GUARANTEE against market loss or declines in the value of the account or a timing strategy. Investor may lose money.
Asset allocation models are subject to general market risk and risks related to economic conditions.
DunhamDC has a limited track record, with an inception date of November 30, 2022.
DunhamDC has a limited track record, with an inception date of July 31, 2024.
Index Definitions:
The S&P 500 - The S&P 500 is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 Index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. You cannot invest directly in an index.
MSCI All Country World Index - The MSCI All Country World Index (ACWI) is a stock index designed to track broad global equity-market performance. Maintained by Morgan Stanley Capital International (MSCI), the index comprises the stocks of nearly 3,000 companies from 23 developed countries and 25 emerging markets.
The MSCI USA Equal Weighted Index - The MSCI USA Equal Weighted Index represents an alternative weighting scheme to its market cap weighted parent index, the MSCI USA Index. The index includes the same constituents as its parent (large and mid cap securities from US markets). However, at each quarterly rebalance date, all index constituents are weighted equally, effectively removing the influence of each constituent’s current price (high or low). Between rebalances, index constituent weightings will fluctuate due to price performance.
NASDAQ Composite Index - The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market.
Russell 1000 Index - The Russell 1000 Index measures the performance of the large-cap segment of the US equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 93% of the US market.
DAX Index - The German Stock Index is a total return index of 40 selected German blue chip stocks traded on the Frankfurt Stock Exchange. The equities use free float shares in the index calculation. The DAX has a base value of 1,000 as of December 31, 1987. As of June 18, 1999 only XETRA equity prices are used to calculate all DAX indices.
FTSE 100 - The FTSE 100 Index is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. The equities use an investibility weighting in the index calculation. The index was developed with a base level of 1000 as of December 30, 1983. * Please see UKEDA100 Index and FTPTP100 Index for the official FTSE 100 Index Dividend Yield and P/E Ratio*
SZSE Component Index - Shenzhen Component Index is a free-float market cap weighted Index. The constituents consist of the 500 largest and most liquid A-share stocks listed and traded in SZSE.
CBOE Volatility Index (VIX) - A real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 index (SPX).
Investors cannot invest directly in an index or benchmark.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.
