On Thursday, the stock market experienced a sharp decline, causing the VIX to rise from 16.6 to 28.2, marking its largest one-day increase since April 2025.
Historical data from Bespoke Investment Group indicates that in similar instances since 1990, the S&P 500 has seen a median return of 4.2% three months later and 4.8% six months later, with positive returns occurring 68% and 79% of the time, respectively.
Paul Hickey, co-founder of Bespoke, likened these volatility spikes to summer thunderstorms, suggesting that while they may create immediate turbulence, the effects are often short-lived. However, the data also reveals that the median return one month after such volatility can be lower, at 2.1%, with an average return of -0.4%, influenced by significant downturns in previous years.
The Nasdaq 100 faced particularly severe losses, marking its worst day since March 2020, and the VanEck Semiconductor ETF traded below its net asset value amid intense selling pressure. Despite this, options trading showed a bearish sentiment, with a significant majority of the $1.7 billion options premium being in puts, indicating that traders are hedging against further declines