‘VIX closes above 40 are rare,’ says Nicholas Colas, co-founder of DataTrek Research

The Cboe Volatility Index, which trades under the ticker symbol VIX, climbed Monday as stock-market investors remained gripped by anxiety over President Donald Trump’s tariffs.

It’s rare to see Wall Street’s so-called fear gauge end as high as it did on Friday — with closes above 40 historically signaling “a crisis that demands an immediate policy response,” according to DataTrek Research. 

The Cboe Volatility Index rose again on Monday after surging Friday amid tariff anxiety. “Friday was a true panic day,” Nicholas Colas, co-founder of DataTrek, wrote in a note emailed Monday.

Stocks tumbled Friday while the VIX closed at 45.31, more than three standard deviations from its long-run mean of 19.5, Colas said. The VIX increased 3.7% on Monday to finish at 46.98, after soaring 50.9% on Friday, according to FactSet data.

 “VIX closes above 40 are rare,” happening just 2.3% of the time, said Colas. “The next level to watch is 50.7 (4 standard deviations),” he wrote. “The only times since 1990 with a VIX at similar readings were in the depths of the 2008 and 2020 Financial and Pandemic Crises.”

The U.S. stock market plunged Monday morning before paring losses and closing mostly lower. That’s after on Friday booking its largest weekly percentage drop since 2020. Stocks will remain “volatile and under pressure” until the U.S. changes its trade and tariff policy, Colas said. 

The S&P 500 finished Monday 0.2% lower, while the Dow Jones Industrial Average dropped 0.9% and the Nasdaq Composite edged up 0.1%, according to FactSet data.

The S&P 500 had plummeted 6% on Friday, extending Thursday’s slide spurred by President Donald Trump’s April 2 tariff announcement from the White House Rose Garden. 

The VIX is above 40 because of “U.S. government policies that have created a crisis in investor confidence similar to wars and major disruptions to the global economy,” said Colas. “Only a change in those policies will force volatility lower and stabilize stock prices.”

Colas listed every other time that the VIX closed above 40 and the subsequent policy response.

For example, he pointed to the Federal Reserve arranging “a private sector bailout” after hedge fund Long Term Capital failed in 1998. And after the 9/11 terror attacks in 2001, the U.S. economy received support from “incremental” fiscal and monetary policy, said Colas.

Pointing to the lead up to the Gulf War II, he said the “2000 – 2002 bear market ended in October 2002, when Congress approved military action against Iraq.” 

He also cited the global financial crisis, saying the government bailed out the U.S. banking system in 2008 while the “Great Recession spurred Congress to pass the American Recovery and Reinvestment Act” in 2009. 

“Stocks eventually bottomed in March 2009,” said Colas. Then, in 2010 – 2011, the Greek Debt Crisis was “eventually resolved by an EU bailout.”

More recently, the 2020 COVID-19 crisis led to “a $5 trillion in U.S. fiscal stimulus” and prompted the Fed to lower interest rates to zero, he said. 

“The only times the VIX has closed higher than Friday’s ending level were in 1998 (1 day), 2008 – 2009 (80 days), 2010 – 2011 (3 days), and 2020 (22 days),” Colas wrote. “In every instance, changes in government policy were needed before volatility declined.”