Why the VIX spike may be a bullish stock market indicator

Wall Street's fearfulness gauge whitethorn not beryllium truthful scary if you person an oculus toward semipermanent investing.

A cardinal marketplace fearfulness indicator, the CBOE Volatility Index (^VIX), precocious had its biggest three-day spike of the year, according to day from Creative Planning main markets strategist Charlie Bilello. The VIX deed its 2025 precocious of 46.98 connected April 7 arsenic Trump tariff fears rippled done planetary markets.

The three-day spike successful the VIX from April 4 to April 7 tallied 118%, making it the fifth-largest spike going backmost to 2014, per Bilello's data.

Interestingly, portion traders often usage the VIX arsenic a short-term broader marketplace fearfulness gauge, the index's utmost levels historically person been a bullish semipermanent indicator for stocks.

After three-day VIX spikes since 2014 ranging from 63% to 176%, Bilello has recovered the mean one-year instrumentality for the S&P 500 (^GSPC) has totaled astir 4.4%. Five years aft the VIX spike, the S&P 500 has averaged a 10.2% return.

"High volatility/fear = opportunity," Bilello said connected X successful an effort to explicate the bullishness tied to an often bearish marketplace measure.

The VIX presently stands astatine 40. Consistent with Bilello's data, buyers person started to look successful the beat-up banal market.

The Dow Jones Industrial Average (^DJI) popped 3.4%, adding implicit 1,300 points astatine the open, arsenic traders fastener successful connected the Trump medication reportedly opening commercialized discussions with Japan and different countries. Sharp gains are besides being seen connected the S&P 500 (^GSPC) and Nasdaq Composite (^IXIC).

The quality is being seen arsenic a motion Trump’s wide tariffs — which are acceptable to footwear successful connected Wednesday — volition beryllium to beryllium a negotiating tactic.

Read more: The latest quality and updates connected Trump's tariffs

China, however, vowed contiguous to punctuation “fight to the end” connected the tariff front.

"Trump telling allies Monday that the tariff extremity crippled is coming sooner than radical expect, with commercialized deals to beryllium negotiated, seems similar the main operator of the bounce successful markets overnight beyond conscionable oversold conditions," 22V Research laminitis Dennis DeBusschere wrote successful a note. "We get it, China quality could get precise scary implicit the adjacent fewer days. We DON’T person an each clear."

DeBusschere added, "In short, the upshot of shooting yourself successful the foot, economically speaking, is that contempt the harm oregon uncertainty created, you don’t request to sprout yourself successful the different foot."

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi connected X @BrianSozzi, Instagram, and LinkedIn. Tips connected stories? Email [email protected].