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Chicago, IL – April 9, 2025 – Today, Zacks Investment Ideas feature highlights S&P 500 (SPY - Free Report) .
Will Recent Stock Market Volatility Morph into a Buying Opportunity?
The past few days have been a wild ride for the stock market.
Heading into the week, the volatility resumed Sunday evening as equity futures plunged, pointing to another thrashing on the heels of nasty back-to-back declines. The major US indexes opened Monday morning down another 4-5% in what looked like another ugly day for the stock market.
At that point, the market was as statistically oversold as it was at the deepest point of the October 2008 and March 2020 waterfall declines.
There have only been three times in history where the S&P 500 (its predecessor index in this case) was down 4% or more on three consecutive days. All three occurred during the Great Depression. In addition, the Nasdaq has never had three consecutive declines of more than 4%. Needless to say, odds of another 4% daily decline were low yesterday, even though we started the morning out there.
Eventually, prices fall far enough to attract new buying demand. We may have seen capitulation yesterday morning, but in order for that to have truly occurred, everyone who wished to sell would’ve sold, leaving room for buyers to step in and overwhelm any remaining selling pressure.
Heading into this week, more than 60% of S&P 500 stocks were down 20% or more from their respective peaks. While the S&P 500 has not officially entered a bear market (based on closing prices), when we look beneath the surface, many individual stocks are already in the dreaded territory. The Nasdaq slipped into a bear market this past Friday.
Volatility Spikes Often Create Buying Opportunities
On a brighter note, we examined 15 historical cases (since 1928) in which the S&P 500 had consecutive daily losses greater than -4.5%. Over the next month, the index lost ground only twice and only once over the following six months. With the exception of the Great Depression era, these types of swift and large corrections normally occurred near important bottoms in the market.
Last Thursday and Friday, the S&P 500 fell 10.5% which marked the 5th largest 2-day decline since 1950. In the past, these outsized 2-day declines have typically paved the way for enhanced market gains moving forward.
In bull markets, volatility spikes can coincide with low-risk buying opportunities. Yesterday, the volatility (VIX) index hit the 60-price level intraday; on a closing basis, the index increased 118% from Thursday’s finish, which was the 5th largest 3-day spike in history.
Averaging the 20 biggest 3-day spikes in the VIX, the S&P 500 has advanced 16.5% one year later. It remains to be seen if this time will follow the course of history, but as we can see, the index is falling sharply today as stocks rise. High levels of fear and volatility create opportunity.
With yesterday’s negative market open, well over 80% of S&P 500 stocks traded at a 1-month low in the early hours. Looking at forward returns following a spike in 1-month lows to more than 80%, S&P 500 stocks were higher in 14 out of 16 previous instances looking one year out, with an average gain of 22%.
Final Thoughts
The historical statistics we shared clearly point to an increased probability of a bounce, but whether the bottom is in for this latest correction remains to be seen.
Through it all, the most important thing for us to do is to manage risk effectively. Risk remains high in this environment and volatility is likely to remain elevated. But the price action over the past two days is certainly a step back in the right direction for the bulls.
Still, the market needs time to repair the recent damage. This is a good time to put in the work with watchlists and be ready for new leaders to emerge, so that we can act decisively when the time comes.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: S&P 500
For Immediate Release
Chicago, IL – April 9, 2025 – Today, Zacks Investment Ideas feature highlights S&P 500 (SPY - Free Report) .
Will Recent Stock Market Volatility Morph into a Buying Opportunity?
The past few days have been a wild ride for the stock market.
Heading into the week, the volatility resumed Sunday evening as equity futures plunged, pointing to another thrashing on the heels of nasty back-to-back declines. The major US indexes opened Monday morning down another 4-5% in what looked like another ugly day for the stock market.
At that point, the market was as statistically oversold as it was at the deepest point of the October 2008 and March 2020 waterfall declines.
There have only been three times in history where the S&P 500 (its predecessor index in this case) was down 4% or more on three consecutive days. All three occurred during the Great Depression. In addition, the Nasdaq has never had three consecutive declines of more than 4%. Needless to say, odds of another 4% daily decline were low yesterday, even though we started the morning out there.
Eventually, prices fall far enough to attract new buying demand. We may have seen capitulation yesterday morning, but in order for that to have truly occurred, everyone who wished to sell would’ve sold, leaving room for buyers to step in and overwhelm any remaining selling pressure.
Heading into this week, more than 60% of S&P 500 stocks were down 20% or more from their respective peaks. While the S&P 500 has not officially entered a bear market (based on closing prices), when we look beneath the surface, many individual stocks are already in the dreaded territory. The Nasdaq slipped into a bear market this past Friday.
Volatility Spikes Often Create Buying Opportunities
On a brighter note, we examined 15 historical cases (since 1928) in which the S&P 500 had consecutive daily losses greater than -4.5%. Over the next month, the index lost ground only twice and only once over the following six months. With the exception of the Great Depression era, these types of swift and large corrections normally occurred near important bottoms in the market.
Last Thursday and Friday, the S&P 500 fell 10.5% which marked the 5th largest 2-day decline since 1950. In the past, these outsized 2-day declines have typically paved the way for enhanced market gains moving forward.
In bull markets, volatility spikes can coincide with low-risk buying opportunities. Yesterday, the volatility (VIX) index hit the 60-price level intraday; on a closing basis, the index increased 118% from Thursday’s finish, which was the 5th largest 3-day spike in history.
Averaging the 20 biggest 3-day spikes in the VIX, the S&P 500 has advanced 16.5% one year later. It remains to be seen if this time will follow the course of history, but as we can see, the index is falling sharply today as stocks rise. High levels of fear and volatility create opportunity.
With yesterday’s negative market open, well over 80% of S&P 500 stocks traded at a 1-month low in the early hours. Looking at forward returns following a spike in 1-month lows to more than 80%, S&P 500 stocks were higher in 14 out of 16 previous instances looking one year out, with an average gain of 22%.
Final Thoughts
The historical statistics we shared clearly point to an increased probability of a bounce, but whether the bottom is in for this latest correction remains to be seen.
Through it all, the most important thing for us to do is to manage risk effectively. Risk remains high in this environment and volatility is likely to remain elevated. But the price action over the past two days is certainly a step back in the right direction for the bulls.
Still, the market needs time to repair the recent damage. This is a good time to put in the work with watchlists and be ready for new leaders to emerge, so that we can act decisively when the time comes.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.