Has the VIX Index Peaked, Signalling a Reversal in Wall Street's Stock Selloff?

Amid heightened tariff risks posed by U.S. President Donald Trump, the CBOE VIX Volatility Index experienced a historic surge, briefly reaching the 60 mark. However, this key measure of market volatility has since been halved. U.S. Treasury Secretary Scott Bessent suggested that the VIX may have already peaked.

In an interview on Monday (April 14), Bessent sought to reassure markets, stating that the U.S. government is implementing robust policies to stabilise the economy. “If uncertainty is measured by the VIX,” he noted, “it is likely that market uncertainty has already reached its peak.”

 Trump’s erratic tariff decisions—particularly the introduction of retaliatory tariffs—have driven the effective U.S. tariff rate to its highest level in over a century. The resulting economic uncertainty triggered investor panic, pushing the VIX to 60.3, its highest level in eight months.

However, tensions eased somewhat after Trump announced a delay on certain tariffs and Bessent made repeated efforts to calm the markets. As of April 16, the VIX had retreated to 33.45.

Bespoke Investment Group remarked that it is “safe to say the acute phase of the selloff is over.” The firm noted that the VIX has declined for three consecutive days, even briefly falling below the 30 threshold on Tuesday.

The decline in the so-called “fear index” may signal a return of buying interest, raising hopes of a potential rebound in U.S. equities.

According to Bank of America research covering the period from 1997 to August 2024, there have been 11 instances when the VIX exceeded 45. Historically, after such spikes, the S&P 500 tended to underperform over the following four to eight weeks. However, within 13 weeks, there was an 80% probability of gains, with an average increase of 5.46% and a median gain of over 5%.