S&P 500 Typically Gains 18% In A Year After VIX Drops From 50 To 30 Level: Here's What Analysts Say

The S&P 500 has given a 17.9% median return each time the CBOE Volatility Index has fallen from over 50 to the 30 level. Analysts highlight historical trends showing how volatility cycles lead to advances in the S&P 500 index.

What Happened: According to Jason Goepfert, a consultant at White Oak Consultancy LLC, each time the fear index, VIX, goes through a cycle of being above 50 to falling to the 30 level, the S&P 500 index logs in 100% of positive gains by the end of that year.

According to the data highlighted by Goepfert, during the most recent VIX cycle of 50-to-30 in May 2020, the S&P 500 returned 42.96% after one year.

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He highlighted data from similar such cycles from 2009, 2002, and 1988. However, historically, the S&P 500 logs a 0.7% median loss after the first week on ending the said 50-to-30 VIX cycle.

Meanwhile, Charlie Bilello of Creative Planning highlighted in his X post how the S&P 500 has reacted after VIX has closed above 50 since 1990.

On average, whenever the VIX has closed above 50, the S&P 500 has returned 35% over one year and 129% over the next five years.

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Why It Matters: The stocks bounced back last week after President Donald Trump announced a 90-day pause for reciprocal tariffs on its trading partners, except China. On Tuesday, the U.S. raised tariffs on goods imported from China to up to 245%.

The Dow closed Tuesday 10.44% below its 52-week peak of 45,073.63. The S&P 500 ended 12.21% off its 6,147.43 high, and the Nasdaq 100 was 15.27% below its 22,222.61 record.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, ended on a mixed note on Tuesday. The SPY was up 0.28% to $537.61, while the QQQ advanced 0.11% to $457.99, according to Benzinga Pro data.

On Wednesday, SPY was down 1.45% and QQQ dropped 2.23%. The Dow Jones futures dropped by 0.78%, the S&P 500 futures were lower by 1.39%, and the Nasdaq 100 declined by 2.14%.

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