Study: What Happens Next When The Stock Market Is Very Volatile

The stock market’s volatility is very high right now. And by “volatility”, we’re not referring to VIX. We’re referring to the S&P 500’s daily % movements.

The stock market’s high volatility right now is not rare. There were a lot of historical periods with high volatility. What’s rare is that the stock market’s high volatility right now was preceded by a period of extremely low volatility (i.e. 2017 – January 2018).

Here’s today’s study: what happens next when:

Here are the historical cases

Let’s look at these historical cases in detail.

*We are eliminating all the cases that occurred near a recession because the economy is nowhere near a recession today. U.S. economic growth is solid. The next recession is at least 1 year (12 months) away. The economy and stock market move in the same direction over the medium-long term.

January 25, 2016

The S&P went down over the next 3 weeks. The next 6%+ “small correction” began 5 months later in June.

August 29, 2011

The S&P went down over the next month. The next 6%+ “small correction” began 7 months later in April 2012.

March 7, 2000

The S&P swung sideways over the next week. Then it rallied for 2 more weeks before the bull market topped on March 24.

December 15, 1997

The S&P went down over the next 3 weeks. There was no “small correction” before the next “significant correction”. The next “significant correction” began 7 months later in July 1998.