The number of extreme days for SPX has been moving lower since April, even with a few sharp days thrown into the mix.
Volatility has picked up over the past few days, but that does not need to be a cause for concern. On Friday, the S&P 500 Index SPX posted a loss of 1.6%, its worst drop since May 21. That was immediately followed by a bounce-back rally Monday, where the S&P 500 rose over 1%. This movement also led the CBOE SPX Volatility Index VIX to spike over 21% on Friday to the 20 level, only to fall back below 18 at the time of this writing on Monday.
Heading into August, we had become used to an unusually quiet market. That changed quickly Friday when we got a 21% spike in the VIX, as it climbed to just over 20 by the close. It is rare to see that large of a spike in a single day. There have been 116 other days that saw the VIX spike at least 21%, placing Friday in the 98th percentile of single day moves dating back to the beginning of 1990. Forward 30-day returns from those days are mixed but generally more positive than negative at a 60% positive hit rate that averages out to a 0.21% gain. Things get even better when we narrow down the instances to only include days where the 21% rally ended with the VIX still sitting below the 21 level (ironic coincidence from Friday). Out of those 43 days, we see the average forward 30-day return improve to a gain of 1.07% and a positive hit rate of 69%. The scatter plots below provide a visual representative of these numbers. The graph on the left shows all 116 instances of a 21% daily rise in the VIX alongside the forward 30-day SPX performance. The graph on the right shows the same information but only looks at the days where the VIX ended below the 21 level, more clearly depicting the bias for positive forward price action.
Our article last Thursday highlighted how quiet market environments can often promote further stability. Even with the spike last Friday, volatility is still generally dropping from the high levels around the beginning of Q2 back to historical norms. You can clearly see that on the VIX chart, especially one looking at the longer-term 1-point chart. However, I doubt you want to show this chart to clients. The VIX is hard enough to explain, and the moment you start dropping terms like “implied options volatility,” client’s eyes will likely glaze over. Meanwhile, they are seeing headlines on the news, looking at days of large movement in stocks, and probably becoming a bit more concerned about what they should expect in the future.
Another way to look at volatility is through our SPX Volatility Study, which measures the percentage of extreme market days. It simply tracks all the days where SPX either gains or loses 1% in value. In 2025, there have been 41 days where the market has moved at least 1%, including the action on Monday (8/4). That equates to about 28% of the trading days so far this year, placing us just above the historical annual average of 26% of trading days. Most of the extreme days this year have been to the downside, which is especially rare in up market years. There were two months of outliers that saw significantly more extreme days, with 12 occurring in March and another 11 occurring in April. At the end of April, we were at 40% of trading days showing an extreme move, well above the historical average. The more muted action over the subsequent three months led us closer to what is considered normal, even with a few sharp days included in the mix.
