S&P 500 hits record high with VIX below 15 in rare market signal
The S&P 500 index reached a record high Friday alongside a Volatility Index closing below 15.
The short version
- StoneX data shows this rare combination has happened only 40 times since 1990.
- What it means for your portfolio: Past instances show lower drawdowns and steady medium-term gains, not an automatic crash.
The S&P 500 set a record high Friday despite a weaker-than-expected US jobs report, according to Investing.com. The S&P 500 has set 27 record highs this year. The record high was accompanied by an unusually low reading on the Volatility Index, or VIX, which closed last week below 15.
This combination of record highs and low expected volatility is relatively rare. Filtering out overlapping signals by counting the first instance in at least 4 weeks, there have been only 40 times that the S&P 500 has set a record high with the VIX below 15 since the VIX was created in 1990.
Looking at these past instances, the average near-term returns are slightly lower than all other periods, while longer-term returns are generally more positive. More significantly, the average drawdown is meaningfully lower across all timeframes studied, according to data from StoneX. An all-time high combined with subdued volatility has historically looked more like a stable bullish regime than a sign of complacency immediately preceding a major reversal.
None of the prior 40 signals experienced a -10 percent closing drawdown over the following 13 weeks, versus roughly 14 percent of ordinary periods. This study adds to other bullish signals suggesting the current bull market could have further to run over the medium-term.
The index is trading comfortably within its 17-month bullish channel, with room to run further toward 8000 before encountering meaningful resistance. Having just broken out of a 3-month consolidation range, the odds favor continued gains as long as the index remains above the previous all-time high at 7620 and the rising 50-day EMA near 7500.
A break below those support levels would raise fears of a failed breakout and could open the door for a move toward the bottom of the rising channel near 7000.
