The VIX Volatility Index had been averaging in the mid-teens for five years in a row before spiking to an average of 29 in 2020. And, of course, that average masked the worst readings of last year when the index was as high as 85 in March as the U.S. economy started to shut down in response to the pandemic. The VIX has been pushing slowly down toward those mid-teen readings in recent months, enduring speed bumps along the way such as a recession, second and third COVID-19 waves, and an extraordinarily divisive U.S. presidential election. Now there are fears of inflation and new COVID variants. Indeed, on Monday, the VIX index jumped 20% due to inflation and variant scares, and S&P 500 dropped more than 75 points. While the S&P is up almost 15% for the year, investors are cautioned to be alert. Since 1920, the index has recorded a 5% pullback three times a year on average and a 10% correction once every year and a half. On our S&P 500 valuation model, stocks are priced for perfection. In this environment, we recommend investors focus on high-quality stocks, with strong balance sheets and experienced management teams.