Fall in volatility

Over the past nine weeks, we’ve seen the sharpest drop in the VIX—the S&P 500’s volatility index—in over 50 years, with a decline of 63%. Statistically, this marks the most significant 90-day compression in volatility since 1990.

That in itself is striking. But what’s perhaps more interesting is what tends to happen next. Historically, such sharp declines in volatility have often been followed by strong equity market returns across 6-month, 1-year, and even 5-year periods. While there are no guarantees, the pattern is consistent: when fear fades quickly, equity markets have typically moved higher.

Let’s hope this time will be no different.