Wall Street's Panic Gauge Just Broke a 13-Year Record. Goldman Says History Favors a Rebound
Goldman Sachs’ Vol Panic Index posted its biggest two-day swing on record last week, jumping to 9.57 out of 10 and pushing US stocks into the bank’s panic zone.
The gauge, which scores stress in US equities from zero to 10, drew on options-market signals such as implied volatility and the cost of downside protection. Barchart data puts the combined two-day move at roughly 8.5 points, beating the previous record of 7.87 points set on April 16, 2013.
The swing began on Wednesday, November 4, as stocks rallied after Democrats won both chambers of Congress. The Dow’s post-election jump reached 3%, prompting clients to sell their hedges. As a result, the Panic Index logged its fourth-largest daily drop on record.
That protection disappeared just before investors needed it. On Thursday, an AI chip stock selloff dragged the S&P 500 down 4.36%, its worst session since April 2025. The index climbed about five points that day, its third-largest daily gain.
The combined two-day swing was the largest on record, which I think shows how quickly the market went from relief to outright panic.
Demand for protection set a record of its own. Cboe handled 11.23 million put contracts on Thursday, topping the 10.22 million traded on April 4, 2025. The Cboe Volatility Index (VIX) jumped 70% that day.
Historical Pattern Suggests Rebound
Goldman’s own history offers a more constructive read. After the 15 earlier readings above 9.5, the S&P 500 gained an average of 4.6% over the next three months. Stocks rose in 80% of those cases, with an average six-month gain of 9%.
However, Coppersmith tied the selloff to poor positioning and forced re-hedging as much as to weaker fundamentals. If forced selling resumes, that historical pattern could take longer to play out.
Not necessarily a reason to rush back into risk, but it’s getting harder to ignore the potential opportunity on the other side.
Two records in one week, in hedging volume and in panic swings, show how crowded short-term positioning has become. Whether the rebound holds may depend less on the election than on AI spending, which drove Thursday’s losses.
Alternative Gauge Shows Fear
CNN’s Fear & Greed Index read 33 on Tuesday, November 10, inside its Fear zone. A week earlier, the gauge stood at 23, in Extreme Fear. It slid to 20 after Thursday’s crash.
Buyers have since returned. The S&P 500 rose 2.35% on Monday, its best day since April 8. The market’s extreme volatility highlights the tension between short-term positioning and longer-term fundamentals.
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