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Volatility catalyst: Post-Covid economic growth disappointment On 27 January 2021, the S & P 500 Index declined 3.3 % on underwhelming growth data with fourth-quarter 2020 GDP growth coming at 4.0 % compared to the 4.2 % consensus. The Federal Reserve ' s dovish stance, signs of slowing retail sales and consumer spending heightened concerns about the prolonged impact of Covid-19. In response, the VIX Index increased 14.2 points from 23 to 37.2.
Volatility catalyst: Yen-carry unwind On 5 August 2024, the S & P 500 Index declined 3.0 % on the rapid unwinding of the yen carry trade. The Bank of Japan’ s surprise rate hike strengthened the yen, forcing leveraged investors to sell US stocks to convert back into yen and repay loans. In response, the VIX Index rose 15.2 points from 23.4 to 38.6.
Volatility catalyst: Liberation Day On 4 April 2025, the S & P 500 Index declined 7 % on escalating
trade tensions with China retaliating against the US with a 34 % tariff on American goods, following President Trump’ s tariff escalation on 2 April. Market participants feared this would escalate into a prolonged trade war, causing the VIX Index to rise + 23.8 points from 21.5 to 45.3.
The historical behavior of the VIX Index during tail events underscores its role as a real-time gauge of market sentiment. Each volatility catalyst analysed triggered swift and pronounced reactions in the VIX Index, reflecting the market’ s recalibration of risk and uncertainty. The index’ s responsiveness to both macroeconomic and microstructural disruptions highlights its utility not only as a hedging tool but also as a lens through which to understand market psychology.
By studying these tail events, market participants can better appreciate the dynamics of volatility, anticipate potential risk scenarios, and refine their strategies for navigating periods of extreme uncertainty. The VIX Index remains a vital component of the financial ecosystem— one that continues to evolve alongside the complexity of global markets. To learn more about the dynamics of the VIX Index, download the VIX Index Decomposition Whitepaper on Cboe. com
Disclaimer: Past performance is not indicative of future results. There are important risks associated with transacting in any of the Cboe Company products discussed here. Before engaging in any transactions in those products, it is important for market participants to carefully review the disclosures and disclaimers contained at: https:// www. cboe. com / global-disclaimers /. © 2025 Cboe Exchange, Inc. All Rights Reserved. The Cboe Volatility Index ®( known as the VIX Index) is calculated and administered by Cboe Global Indices, LLC. The VIX Index is a financial benchmark designed to be a market estimate of expected volatility of the S & P 500 ® Index, and is calculated using the midpoint of quotes of certain S & P 500 Index options as further described in the methodology, rules and other information at www. cboe. com / indices / governance /
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