What the VIX Can Tell Us About THE FUTURE of the Stock Market
Key Points:
📉 The VIX is more than a “fear index” – when analyzed with the S&P 500, it reveals potential market turning points during extreme spikes in volatility.
📊 Historically, when the VIX spikes above 50 and then drops below 30, it has marked the end of bear markets and the start of long bull runs (e.g., 2009, 2020… and now 2025?).
🚀 This rare pattern has just appeared again, potentially signaling the beginning of a major new market cycle—an opportunity worth watching closely.
When people talk about the VIX index they often call it the “fear index”, a tool that
measures market anxiety. But the VIX is much more than that. It can also give us some
very interesting clues about the future direction of the stock market.
Let’s start by looking at the S&P 500, the most widely followed stock index in the United
States. If you’ve been following my work for a while, you already know that I expect a
possible market correction during the summer. However, I believe this would only be a
short-term dip. Over the long term, I’m still very optimistic about the market and I’d like to
explain why.
A Long-Term View: S&P 500 and VIX Over 20 Years
With the help of Forecaster, let’s analyze a 20-year chart of the S&P 500 together with
the VIX, the volatility index published by the Chicago Board Options Exchange (CBOE).
The VIX measures the expected volatility of S&P 500 options, in simple terms, it reflects
how nervous investors are about the future.
When we compare these two charts, something very interesting appears. The biggest
market bottoms, the moments when the S&P 500 hit major lows, all happened when the
VIX reached extremely high levels. In particular, spikes in the VIX above 50 are rare
and significant.
From 2004 to 2024, there have only been two such extreme spikes:
• The first occurred during the 2008–2009 global financial crisis.
• The second happened during the COVID-19 pandemic in 2020.
These were moments of extreme fear, but also major turning points in the stock market.
After each of these peaks in volatility, the S&P 500 eventually began a long and
strong recovery.
Now, something similar has just happened again.
April 2025: a historic turning point?
In April 2025, the VIX spiked once again, reaching a level above 50, just like in 2008 and
2020. Based on history, this kind of volatility event often signals a major market bottom. If
this pattern holds true, it means that the low we saw around that time could become one
of the most important market lows in decades.
This is why I believe we are looking at a huge opportunity for the next 10 years. In the
last two decades, we have only seen this kind of setup three times. Each time, the market
eventually entered a long bullish phase.
Some investors might feel uncomfortable when looking at a 20-year chart of the S&P 500.
The index has grown a lot, and some might wonder if it can keep going higher. But I
believe that the combination of long-term economic growth and the fact that we’ve just
seen one of the rare VIX spikes gives us strong reasons to remain positive. In my opinion,
this is not the end of the cycle, it’s the beginning of a new one.
There’s one more important signal we can take from the VIX. Historically, after a market
crash, the bear market is considered over when the VIX, after reaching a high point
above 50, falls back below 30.
Let’s look again at past events:
• In 2009, after the financial crisis, the VIX fell from above 50 to below 30, confirming
that the worst was behind us.
• The same thing happened in 2020 during the COVID crisis.
Now, in 2025, we are seeing the same behavior. After the big spike in April, the VIX has
dropped again to below 30. This, for me, is another strong confirmation that the bear
market is over and a new bull market has likely begun.
This pattern has repeated only three times in 20 years. Each time, it marked the end of
fear and the beginning of a powerful recovery in the S&P 500.
Final Thoughts
The VIX index is not just a fear indicator. It’s a powerful tool that, when used properly,
can help us understand the bigger picture of the financial markets. By studying it alongside
the S&P 500, we can spot moments of extreme fear that often lead to the best long-term
opportunities.
And if you want to take your market analysis to the next level, try the Forecaster terminal,
the software I used to create these charts. You can test it completely for free.