VIX volatility index spike and stock market selloff, Digi Mart USA News: If you are looking for something positive after Thursday’s shocking stock market selloff, history may offer some encouragement heading into the weekend.
Historically, stocks have tended to perform well following extreme volatility, such as the turbulence seen two days after the Election Day blue wave. The VIX volatility index (^VVIX), better known as Wall Street’s fear gauge, jumped as much as 70% on Thursday.
According to data from CBOE, a move of that size has happened only eight times since 1991.
After the eight prior extreme moves, the S&P 500 averaged a gain of 10.4% six months later, and it was positive in all eight instances. While that history is somewhat comforting, it does not erase what happened in the markets Thursday, when risk was repriced for a Democratic control of the House and Senate.
Read more: How to protect your money during turmoil and stock market volatility.
The S&P 500 (^GSPC) lost 4.4% of its market value, wiping out $3 trillion. Measured another way, the index’s total market capitalization fell from $68.9 trillion to $65.9 trillion, the largest one-day dollar loss in the index’s history.
The Dow Jones Industrial Average plunged 1,830 points in its worst single-day rout since 2020. The tech-heavy Nasdaq fell 5.5%, dragged down by semiconductor and cloud companies such as Micron (MU) and Sandisk (SNDK).
“We are now seeing something of a buyers’ strike in tech,” said Keith Lerner, chief markets strategist at Truist.
