Business news and discussion on TalkFuse.
Wall Street’s fear gauge may be flashing a buy sign
US shares suffered an unusually sharp sell-off, with the S&P 500 falling 4% and the Nasdaq 100 dropping 6%. The article suggests the volatility gauge may signal a buying opportunity, but cautions that the immediate aftermath of market shocks can still bring losses.
The median market return one month after similar episodes was 2.1%, while the average was a 0.4% decline, pulled down by steep falls in 1990 and during the early Covid sell-off in February 2020. Before Thursday, only 12 other days had seen both indexes fall by at least those amounts. The Nasdaq 100 had its worst day since March 2020, while its volatility index rose to 38.3; semiconductor ETF options trading also showed strong demand for puts.
In short
- The S&P 500 fell 4% and the Nasdaq 100 fell 6%.
- Similar shocks brought a 2.1% median one-month return.
- Heavy put buying showed traders remained cautious.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
The volatility spike and historical comparisons may indicate that selling has become excessive, creating an opportunity for investors willing to tolerate short-term risk. The median return after similar sell-offs was positive, and investors with a long time horizon may see lower prices as a chance to buy.
The case against
A volatility surge can reflect genuine uncertainty and may precede further losses, so treating it as a buy signal risks acting too soon. The average one-month return after comparable episodes was negative, and sharp declines in 1990 and early 2020 show how a few crises can overwhelm the more reassuring median.