Goldman Sachs Volatility Panic Index, Digi Mart USA News: Goldman Sachs Group traders said recent sharp swings in US stocks have pushed market panic to historically extreme levels. The Goldman Sachs Volatility Panic Index rose to 9.57 on Thursday, approaching the maximum score of 10 and breaking through the 9.5 panic-zone threshold.
Historical data show that after the gauge reaches this level, the S&P 500 has often rebounded in the following months, though traders cautioned that the market may still be in a bottom-finding and deleveraging phase in the near term.
Data show that in the 15 prior instances when the Goldman Sachs Volatility Panic Index exceeded 9.5, the S&P 500 rose an average of 4.6% over the next three months, gaining in 80% of those periods. Over a six-month window, the index gained an average of 9%, with a 73% probability of advancing.
On Friday, the S&P 500 rose 0.7%, indicating that dip buyers have begun to step in. Still, a single-day rebound is not enough to prove the correction is complete.
The speed and magnitude of this episode have been particularly striking. Goldman data show the index jumped about 5 points in a single day on Thursday, the third-largest one-day gain on record, following a sharp selloff in the prior session.
The two-day combined move was the largest in history, reflecting a rapid shift in investor sentiment from relief to panic in a very short span.
Goldman trader Lee Coppersmith said the violent two-day swing “says a lot about how quickly the market went from relief to outright panic.” He believes the recent price action is not entirely the result of deteriorating economic fundamentals, but that technical deterioration and investors being forced to rebuild hedges also played an important role.
From a trading-path perspective, the sharp reversal was tied to hedging activity around the U.S. Midterm Elections.
Before the vote, demand for downside protection rose markedly. After the election, when the market rallied and fears eased, some investors sold the hedges they had built.
When stocks subsequently turned lower, portfolios were under-protected, and the decline triggered unwinding at some hedge funds, prompting investors to rush back into protective positions, further amplifying volatility.
The options market also showed a concentrated surge in hedging demand. On Thursday, Cboe put option volume exceeded 11 million contracts, setting a single-day record and surpassing the prior peak in April 2025.
Index puts accounted for the bulk of volume, while single-stock put volume ranked fourth-highest in history, indicating investors were more focused on protecting against broad market risk.
Goldman’s historical statistics are based on its analysis of the 15 prior instances when the index breached 9.5 and do not directly represent future market outcomes.
Although the historical pattern offers a relatively positive reference for the medium term, Goldman traders did not conclude that investors should immediately return fully to risk assets. The market is still digesting prior selling, unwinding and deleveraging pressure, and some position adjustments may not yet be complete.
“As forced selling subsides, the market’s allocation appeal begins to rise,” Coppersmith wrote. He stressed that this does not mean rushing back into risk assets, but that opportunities after the volatility are becoming increasingly hard to ignore.
For the market, extreme panic readings are typically two-sided. On one hand, concentrated hedging and forced selling may cause short-term overshooting, creating conditions for medium-term reallocation.
On the other hand, if economic data, corporate earnings or liquidity conditions continue to deteriorate, the panic gauge itself cannot prevent further declines. Investors therefore still need to watch whether the deleveraging process has ended and whether the rebound can broaden from a handful of dip buyers to a wider return of capital.
For now, Friday’s US stock rebound, alongside relatively resilient US economic data, has provided temporary support. But judging from Goldman traders’ assessment, the current juncture is closer to “an observation window after extreme volatility” than to a correction that has fully run its course.
If selling pressure gradually eases and options hedging demand recedes, the medium-term rebound probability suggested by historical statistics may be validated. If forced liquidation and risk-position contraction continue, short-term turbulence may persist.
