<p>Fear is unwinding as fast as it built.</p>



<p>The CBOE Volatility Index — commonly known as the VIX, Wall Street’s real-time gauge of expected equity market volatility — collapsed 44% over the three weeks ending April 17, 2026. The gauge hit a nine-week low of 16.87 Friday as Iran reopened the Strait of Hormuz and U.S. President <strong>Donald Trump</strong> announced Tehran had agreed to never close the waterway again. </p>



<p>A drop of that magnitude over a three-week window is rare. </p>



<p>History suggests what follows tends to be positive and durable for equity markets.</p>



<h2><strong>A Rare Signal: Only Seven Prior Episodes Since 1970</strong></h2>



<p>A TradingView event study analyzing every instance of a three-week VIX rate of change dropping at or below negative 40% since 1970 identified just seven prior episodes. </p>



<p>The current reading of negative 43.74 joins that list as the eighth.</p>



<figure class="wp-block-table is-style-stripes"><table><thead><tr><th>Date</th><th>VIX 3-Week Move %</th><th>Catalyst</th></tr></thead><tbody><tr><td>Jan 14, 2013</td><td>−45.16%</td><td>U.S. fiscal cliff crisis resolved</td></tr><tr><td>Nov 3, 2014</td><td>−40.34%</td><td>Mid-cycle growth scare; Ebola fears and slowing global demand faded</td></tr><tr><td>Jul 11, 2016</td><td>−50.82%</td><td>Brexit vote shock absorbed; central banks signaled accommodation</td></tr><tr><td>Nov 21, 2016</td><td>−45.18%</td><td>U.S. presidential election; markets pivoted to reflationary fiscal expansion</td></tr><tr><td>Apr 13, 2020</td><td>−41.79%</td><td>Fed unleashed unlimited QE; Congress passed $2 trillion stimulus package</td></tr><tr><td>Dec 20, 2021</td><td>−41.44%</td><td>Omicron variant faded, but the Fed started to signal monetary tightening.</td></tr><tr><td>Apr 21, 2025</td><td>−45.18%</td><td>U.S.-China trade truce; Fed on hold; </td></tr><tr><td><strong>Apr 13, 2026 ★</strong></td><td><strong>−43.74%</strong></td><td>Strait of Hormuz reopened; Iran agreed to permanent closure ban. </td></tr></tbody></table></figure>



<h2>How The S&amp;P 500 Reacted After A VIX Collapse</h2>



<p>Across all eight episodes, the S&amp;P 500 ― as tracked by the <strong>SPDR S&amp;P 500 ETF Trust</strong> (NYSE:SPY) ― averaged a gain of 0.87% in the following month, 5.09% over three months, 6.97% over six months and 14.37% over the following year. </p>



<p>The 12-month win rate stood at 85.71% — six of seven completed episodes produced positive returns a year later. </p>



<p>The median 12-month return of 16.51% exceeded the average, meaning the distribution skews toward strong outcomes rather than being lifted by a single outlier.</p>



<p>December 2021 is the exception and the warning. </p>



<p>The VIX had spiked on the emergence of the Omicron variant of the Covid virus before collapsing as the variant proved less severe than feared. But the collapse in fear came precisely as the Federal Reserve was acknowledging that inflation was not transitory and beginning to signal an aggressive tightening cycle. </p>



<p>The S&amp;P 500 fell 3.81% over three months, 22.26% over six months and 16.43% over the following year as rate hikes compressed valuations across growth assets. The maximum drawdown of 24.8% was the worst in the sample by a wide margin.</p>



<p>Bottom line, the fear gauge has crashed on the ceasefire and Hormuz reopening. </p>



<p>The eighth outcome on what the S&amp;P 500 does next depends on what happens in Islamabad on Sunday.</p>



<figure class="wp-block-table is-style-stripes"><table><thead><tr><th>VIX Signal</th><th>SPY Forward Return – 1M %</th><th>SPY Forward Return –3M %</th><th>SPY Forward Return –6M %</th><th>SPY Forward Return –1Y %</th><th>SPY Forward Return –Max DD %</th></tr></thead><tbody><tr><td>Jan 14, 2013</td><td>2.55%</td><td>4.82%</td><td>12.93%</td><td>23.30%</td><td>−4.71%</td></tr><tr><td>Nov 3, 2014</td><td>2.29%</td><td>1.09%</td><td>3.63%</td><td>2.05%</td><td>−9.58%</td></tr><tr><td>Jul 11, 2016</td><td>1.22%</td><td>−1.26%</td><td>5.27%</td><td>12.03%</td><td>−4.57%</td></tr><tr><td>Nov 21, 2016</td><td>1.89%</td><td>6.87%</td><td>7.58%</td><td>16.51%</td><td>−2.48%</td></tr><tr><td>Apr 13, 2020</td><td>−0.13%</td><td>12.24%</td><td>21.01%</td><td>39.76%</td><td>−6.86%</td></tr><tr><td>Dec 20, 2021</td><td>−6.93%</td><td>−3.81%</td><td>−22.26%</td><td>−16.43%</td><td>−24.80%</td></tr><tr><td>Apr 21, 2025</td><td>5.17%</td><td>15.70%</td><td>20.66%</td><td>23.39%</td><td>−8.64%</td></tr><tr><td><strong>Apr 13, 2026 ★</strong></td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td></tr><tr><td><strong>AVG</strong></td><td>0.87%</td><td>5.09%</td><td>6.97%</td><td>14.37%</td><td>−8.81%</td></tr><tr><td><strong>MEDIAN</strong></td><td>1.89%</td><td>4.82%</td><td>7.58%</td><td>16.51%</td><td>−6.86%</td></tr><tr><td><strong>WIN %</strong></td><td>71.43%</td><td>71.43%</td><td>85.71%</td><td>85.71%</td><td>—</td></tr><tr><td><strong>BEST </strong></td><td>5.17%<strong> </strong>(Apr 2025)</td><td>15.70% (Apr 2025)</td><td>21.01% (Apr 2020)</td><td>39.76% (Apr 2020)</td><td>—</td></tr><tr><td><strong>WORST — Dec 2021</strong></td><td>−6.93% (Dec 2021)</td><td>−3.81% (Dec 2021)</td><td>−22.26% (Dec 2021)</td><td>−16.43% (Dec 2021)</td><td>—</td></tr></tbody></table></figure>



<p><em>Image: Shutterstock</em></p>





.VIX

.SPX

<p>The VIX, Wall Street's volatility gauge, dropped 44% in three weeks, reaching a nine-week low as Iran reopened the Strait of Hormuz. Historically, after similar VIX collapses since 1970, the S&P 500 has shown positive returns, averaging gains of 0.87% in one month and 14.37% over a year. However, the December 2021 episode serves as a cautionary tale, where the S&P fell significantly due to the Fed's tightening signals. The current situation's impact on the S&P 500 remains to be seen, depending on upcoming developments.</p>

- The CBOE Volatility Index (VIX) plunged 44% in three weeks, reaching a nine-week low due to the reopening of the Strait of Hormuz and Iran's agreement not to close it again.  
- Historical analysis shows that a significant VIX drop often correlates with positive and sustained returns in equity markets, with the S&P 500 averaging gains over one year following similar events.  
- However, the December 2021 episode serves as a cautionary example, where despite a VIX decline, the S&P 500 experienced significant losses due to tightening monetary policy.

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Wall Street's Fear Gauge Just Had A Historic Collapse: Here's What Happened To S&P 500 Every Time Before