Nervous investors should keep in mind that market volatility often creates opportunity, according to Wells Fargo Investment Institute. Tariff-induced market tumult has rattled traders, with the S & P 500 tumbling 9% the week President Donald Trump rolled out his new “reciprocal” levies. But investors who are patient and willing to ride out the bumps could see outsized gains this time next year. .SPX 1M mountain S & P 500 1M chart “With this backdrop, it is natural to be concerned, but we would advise investors to allay their fears and view the volatility as a potential opportunity,” wrote Wells Fargo Investment Institute analyst Edward Lee in a Monday note. “Concern is normal, but history has taught us that periods of higher volatility have historically led to higher returns.” The following chart, adapted from Wells Fargo Investment Institute’s note, shows the average 12-month performance of the S & P 500 across varying degrees of stock market volatility, based on the CBOE Volatility Index , or VIX. The chart shows that when the VIX has been above 40, forward returns for the S & P 500 have averaged more than 30% and have been positive over 90% of the time. The VIX topped 60 in early April and has remained elevated since then, Lee said. To put this finding in context, the index started 2025 at just above 17, and it was last trading near 25 around midday Tuesday. Over the next six to 18 months, the analyst thinks that continued economic and earnings expansion will counter economic and tariff concerns, helping to boost investor sentiment. With that in mind, Lee recommend investors position their portfolios for the most attractive returns. “We continue to favor quality and prefer U.S. large and mid-cap equities over U.S. small-cap equities as well as developed market ex-U.S. equities over emerging market equities,” he wrote.
History of market volatility spikes shows S&P 500 should be higher a year after this turmoil
Apr 29, 2025
