Hedging chaos pushes US market panic to record extreme
The Vol Panic Index surged to 9.57 out of 10, signaling historically strong rebounds over three to six months.
US markets swung wildly this week as investors dumped hedges into a post-election relief rally, then scrambled to buy them back when stocks tumbled. The panic index surged to 9.57, with a two-day swing that Goldman says has no precedent.
Goldman's historical analysis shows that after 15 previous times the index exceeded 9.5, the S&P 500 gained an average of 4.6% over the next three months, with an 80% hit rate. Over six months, the average gain was 9%.
Traders say the volatility came from forced liquidations in hedge funds as protection evaporated.
- 9.57 out of 10
- Vol Panic Index peak
- 11 million
- Put contracts traded Thursday
- April 2025
- Previous record peak
- 4.6%
- S&P 500 three-month average gain
Why it mattersExtreme panic often marks the bottom of a selloff, so investors who stay calm and hold through short-term chaos tend to see gains.
AustraliaAustralian superannuation funds and direct US share investors hold significant exposure; a US market rebound would boost retirement savings and portfolios.
Corroborated bybloomberg.com
