VIX - Extreme fear in the market: a unique opportunity?


An analysis of the most significant
VIX spikes (1987-2025) and subsequent stock market performance.

The VIX (Volatility Index) is an indicator that reflects the level of fear or uncertainty in the market based on expectations of volatility in the S&P 500 Index.
The VIX's 118% surge from April 4 to April 7, 2025 was the fifth largest 3-day surge in market history.
This surge 🚀 reflects the high level of uncertainty that has developed in the markets.
It is very difficult to make informed investment decisions during such periods.
But we can rely on historical patterns.

After the 20 largest VIX spikes, the S&P 500 Index has consistently delivered exceptional returns:
- After 1 year: 16.5% (vs. 12% in normal periods)
- After 3 years: 45.9% (vs. 39.5% in normal periods)
- After 5 years: 83.0% (vs. 74.4% in normal periods)
The difference in returns over the 4 years is 10.2% above average.

Over the past 40 years, there has only been one negative return (the 2007 spike before the financial crisis), while most extreme fear events have become outstanding buying opportunities. For example, the August 2011 spike was followed by an impressive 117% return over the next five years.

When market panic reaches extreme levels, institutional capital typically steps in against retail sales, setting the stage for stronger long-term growth. History shows that these moments of maximum fear often represent optimal entry points for patient investors.

It is essential to realize that historical patterns do not always hold true in the future. Each crisis has unique characteristics and causes that can lead to different outcomes.
These statistics provide good mathematical expectations, not guarantees.
This has always been the case in the market, and proper handling of math expectations and risk management are the foundations of profitable strategies.

Best regards EXCAVO
https://www.tradingview.com/chart/VIX/C7TcP46D-VIX-Extreme-fear-in-the-market-a-unique-opportunity/

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