If you’re looking for something positive after Thursday’s shocking stock drop, you’ve come to the right place heading into the weekend.
History suggests that stocks tend to do well after the extreme volatility we experienced two days after the Election Day blue wave.
The VIX Volatility Index (^VVIX) – better known as Wall Street’s fear gauge – jumped 70% on Thursday. A decision of this magnitude has only occurred eight times since 1991, according to CBOE data.
Here’s what happened to the S&P 500 on average after the previous eight extreme moves:
1 month later: +3.0% (7 out of 8 times positive)
3 months later: +7.1% (6 times out of 8 positive)
6 months later: +10.4% (8 out of 8 times positive)
1 year later: +14.7% (7 times out of 8 positive)
While this is somewhat comforting, it doesn’t exactly erase from mind what happened in the markets yesterday, as the risk has been reassessed for Democratic control of the House and Senate.
Learn more: How to protect your money during turbulent and volatile stock markets
The S&P 500 (^GSPC) lost 4.4% of its market value, wiping out $3 trillion. Looked at another way, the total market capitalization of the S&P 500 fell from $68.9 trillion to $65.9 trillion – the largest one-day dollar loss in the index’s history.
The Dow Jones Industrial Average plunged 1,830 points in its worst single-day rout since 2020. The tech-heavy Nasdaq fell 5.5%, dragged down by semiconductor and cloud giants such as Micron (MU) and Sandisk (SNDK).
“We’re now seeing something of a buyers’ strike in the tech sector,” said Keith Lerner, Truist’s chief market strategist.
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