Wall Street’s fear gauge has jumped 50% or more in a single session just 10 times since 1990.
In nine of them, the S&P 500 was higher one month later.
On Thursday, the CBOE Volatility Index, or VIX, jumped 69.66% to 28.18 from 16.61. It was the third-largest one-day percentage gain since 1990, behind only Feb. 5, 2018 (+117.48%) and Dec. 18, 2024 (+74.04%).
The AI trade unwound sharply on fears the Democratic sweep in the midterms could slow the data center buildout.
The S&P 500 fell 4.36% to 7,353.73, its worst session since the April 2025 tariff shock. The SPDR S&P 500 ETF Trust (NYSE:SPY) tracked the slide.
Yardeni Calls the Sell-off a Buying Opportunity
Ed Yardeni, president of Yardeni Research, said Wednesday’s rally was mostly short covering, as investors’ fears of a contested election and a renewed escalation in Iran did not play out.
On Thursday, the focus shifted to the AI investment boom, which Yardeni called the economy’s golden goose.
Yardeni cited NBC exit polls showing 76% of voters oppose new data centers in their communities. Texas, which accounts for nearly 30% of planned U.S. data center additions in 2028, elected Gina Hinojosa as governor after she promised to halt new approvals.
Still, Yardeni sees speed bumps, not roadblocks. He said Wall Street’s pricing of the worst outcome is overdone.
After the close, Hinojosa said on CNN that projects that already have permits in Texas can be finished. According to Yardeni, that covers essentially all of 2027 and likely most of 2028.
“From a contrarian perspective, panic attacks tend to be bullish,” Yardeni said in a note Thursday.
He kept his 7,900 year-end S&P 500 target, which implies a 7.4% gain from Thursday’s close.
Technical Breakdown
The study tracks the S&P 500 after every session since 1990 in which the VIX closed at least 50% above its prior close.
The one-month signal is the strongest. The index gained an average of 2.56% in the month after a spike, with a 90% win rate. That is more than three times the 0.81% average for all one-month periods.
The edge persists for six months. By 12 months, it largely fades, as the 11.27% average gain is barely above the 10.24% norm.
| Horizon | Avg return | Median return | Win rate | Avg. all periods |
|---|---|---|---|---|
| 1 month | 2.56% | 3.37% | 90% | 0.81% |
| 3 months | 5.55% | 7.49% | 70% | 2.47% |
| 6 months | 9.04% | 7.39% | 80% | 4.92% |
| 12 months | 11.27% | 12.65% | 80% | 10.24% |
The path was rarely smooth. On average, the index fell 5.71% from its high at some point in the following month, and 15.77% at some point in the following year.
The best case came after the April 4, 2025 Liberation Day spike, when the S&P 500 gained 11.36% in a month and 32.84% in six months. The worst came on July 23, 1990, about a week before Iraq invaded Kuwait. A month later, the index was down 13.58%.
The 2018 Midterms Are a Warning
February 2018 rhymes most closely with this week.
That spike followed a long stretch of calm. A month later, the S&P 500 was up 2.72%. Within a year, however, it had fallen 20.21% from peak to trough, as the selloff deepened around the 2018 midterms.
Alex Guiliano, chief investment officer at Resonate Wealth Partners, sees that risk again.
“We remind investors that before and after the midterm elections of 2018, the stock market experienced significant volatility and declined nearly 20%, so there is a historical precedent for more downside risk ahead,” Guiliano said in emailed comments.
November 2021 is the other warning. The S&P 500 was down 13.73% a year after that spike, as the Federal Reserve started raising rates.
Friday’s First Test
Nonfarm payrolls rose by 165,000 in October, compared with expectations of 62,000, while unemployment fell to 4.1%, according to the Bureau of Labor Statistics.
Shortly after the open, SPY rose 0.3%, the Invesco QQQ Trust (NASDAQ:QQQ) gained 1.5% and the VanEck Semiconductor ETF (NASDAQ:SMH) rebounded 4.3%. The VIX eased 5.2% to 26.71.
History favors buyers over the next month. The 1990 and 2021 cases show that the one-year outcome depends more on the macro backdrop.
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