DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

Wall Street has just endured a punishing stock market reversal, but the historical record offers battered investors a measure of encouragement. Extreme volatility of the kind seen Thursday has previously been followed by strong average gains in the S&P 500.

The VIX volatility index (^VVIX), widely known as Wall Street’s fear gauge, surged as much as 70% on Thursday. According to data from CBOE, a move that large has occurred only eight times since 1991.

Those rare episodes produced a notably favorable record for stocks over the following months. Three months after the eight previous extreme volatility moves, the S&P 500 had gained an average of 7.1%.

The index was positive six of those eight times at the three month mark. That record suggests sharp bursts of market fear have often been followed by a substantial recovery rather than a prolonged decline.

The results were even stronger over a longer period. Six months after the eight earlier volatility spikes, the S&P 500 had risen an average of 10.4%.

All eight episodes produced positive returns at the six month point. That clean record offers some comfort following Thursday’s severe market losses, though the historical figures do not erase the scale of the latest damage.

The selloff arrived two days after an Election Day blue wave. Markets repriced risk for Democratic control of the House and Senate, sending major indexes sharply lower and putting technology shares under particularly intense pressure.

The S&P 500 lost 4.4% of its market value during the session. That decline wiped out $3 trillion and reduced the index’s total market capitalization from $68.9 trillion to $65.9 trillion.

Measured in dollars, it was the largest one day loss in the S&P 500’s history. The sheer size of the decline reflected how rapidly investors reassessed stock valuations following the election results.

The Dow Jones Industrial Average suffered an equally dramatic rout. It plunged 1,830 points in its worst single day decline since 2020, extending the sense of alarm across the broader market.

Technology stocks absorbed even heavier punishment. The Nasdaq cratered 5.5% as semiconductor and cloud giants came under pressure, with Micron and Sandisk among the companies dragging the technology focused index lower.

The damage followed a period in which investors had already been confronting concerns around major technology shares. Thursday’s retreat showed how quickly those pressures could accelerate when market participants moved away from risk.

Truist chief markets strategist Keith Lerner described the shift in stark terms. “We are now seeing something of a buyers' strike in tech,” Lerner said.

The contrast between the immediate damage and the longer historical record is striking. Thursday delivered one of the most severe market sessions in years, yet previous volatility surges of comparable size were followed by positive six month S&P 500 returns every time.

At the same time, the three month record was not flawless. The S&P 500 was positive in six of eight comparable cases, while the average gain across all eight episodes reached 7.1%.

For investors searching for encouragement after the stock market beatdown, the CBOE figures provide it. The prior eight extreme moves were followed by an average 10.4% S&P 500 advance over six months, despite the intense fear surrounding those earlier episodes.

The latest shock still leaves investors facing the consequences of a historic one day loss, a 1,830 point Dow plunge, and a 5.5% Nasdaq collapse. History, however, shows that similarly violent volatility spikes have often preceded meaningful gains rather than continued losses.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.