Wall Street’s so-called fear gauge seldom ends as high as it did on Friday; according to DataTrek Research, closures over 40 traditionally indicate “a crisis that demands an immediate policy response.”
The VIX, or Cboe Volatility Index
-7.13%
increased once again on Monday after a spike on Friday due to concerns about tariffs. In an email sent on Monday, Nicholas Colas, co-founder of DataTrek, stated, “Friday was a true panic day.”
The VIX finished at 45.31 on Friday, more than three standard deviations from its long-term norm of 19.5, while stocks fell, according to Colas. According to FactSet statistics, the VIX rose 3.7% on Monday to close at 46.98 after jumping 50.9% on Friday.
April 10, 20, 30, 40, 50, 2025
Colas said that “VIX closes above 40 are rare,” occurring just 2.3% of the time. He stated, “50.7 (4 standard deviations) is the next level to watch.” “The depths of the 2008 and 2020 Financial and Pandemic Crises were the only periods since 1990 when a VIX had comparable readings.”
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How portfolios might be protected by safe stocks during turbulent times
How portfolios might be protected by safe stocks during turbulent times
Play the video: How portfolios might be protected by safe stocks during turbulent times
Investors are searching for strategies to reduce risk without exiting the market as market volatility increases and tariff worries affect stocks. The solution may lie in defensive stocks, such as Duke Energy, CVS, and Coca-Cola.
After plunging Monday morning, the U.S. stock market pared losses and ended the day largely lower. This comes after it recorded its biggest weekly percentage decline since 2020 on Friday. According to Colas, stocks will continue to be “volatile and under pressure” until the United States modifies its trade and tariff policies.
The SPX and S&P 500
-0.23%
saw a 0.2% decline on Monday, while the Dow Jones Industrial Average (DJIA)
-0.91%
decreased by 0.9%, whereas the Nasdaq Composite Index
+0.10%
increased by 0.1%, based on FactSet data.
Following Thursday’s decline sparked by President Donald Trump’s tariff announcement from the White House Rose Garden on April 2, the S&P 500 fell 6% on Friday.
“U.S. government policies that have created a crisis in investor confidence similar to wars and major disruptions to the global economy” are the reason why the VIX is above 40, according to Colas. “The only way to reduce volatility and stabilize stock prices is to alter those policies.”
Every other time the VIX closed over 40, Colas noted it along with the ensuing policy reaction.
For example, he pointed to the Federal Reserve arranging “a private sector bailout” after hedge fund Long Term Capital failed in 1998. And following the 9/11 terror attacks in 2001, the U.S. economy gained assistance from “incremental” fiscal and monetary policies, added Colas.
Pointing to the build up to the Gulf War II, he claimed the “2000 – 2002 bear market ended in October 2002, when Congress approved military action against Iraq.”
He also cited the global financial crisis, saying the government bailed out the U.S. banking system in 2008 while the “Great Recession spurred Congress to pass the American Recovery and Reinvestment Act” in 2009.
“Stocks eventually bottomed in March 2009,” said Colas. Then, in 2010 – 2011, the Greek Debt Crisis was “eventually resolved by an EU bailout.”
More recently, the 2020 COVID-19 crisis resulted to “a $5 trillion in U.S. fiscal stimulus” and caused the Fed to drop interest rates to zero, he claimed.
“The only times the VIX has closed higher than Friday’s ending level were in 1998 (1 day), 2008 – 2009 (80 days), 2010 – 2011 (3 days), and 2020 (22 days),” Colas noted. “In each case, policy changes were required before volatility decreased.”