The first four months of 2026 have introduced a set of risks which have in turn introduced elevated volatility in financial markets. As investors continue to navigate and manage this instability, our weekly market commentary provides some historical context and framework on how increased volatility has impacted long-term stock market performance.
The enclosed chart shows the forward returns of the S&P 500 Index, broken out by VIX Index range. Remember, the VIX measures how much volatility investors anticipate in the S&P 500 over the next 30 days. It is often referred to as the fear index. The VIX is calculated using options prices on the S&P 500, but ultimately, investors need to know when markets are calm and confidence is high, the VIX goes down and there is a lower value. These ranges are on the left-hand side of the chart. When markets are stressed and uncertainty is high, the VIX goes up and there is a higher value. These ranges are on the right-hand side of the chart.
For each VIX Index range, there are then four measures. The first, represented by the green bars, is the average 1 month forward returns of the S&P 500 Index. The next, represented by the orange bars, is the average 3 month forward returns of the S&P 500 Index. The third, represented by the light blue bars, is the average 6 month forward returns of the S&P 500 Index. And the final, represented by the dark blue bars, is the average 12 month forward returns of the S&P 500 Index.
Looking at the data, and as the author explains, “history paints a clear picture when comparing S&P 500 Index 12-month forward returns across different levels of market volatility. When the VIX has surged into the 40-50 range – periods that often feel, in real time, as though something has fundamentally broken – subsequent 12-month returns have averaged gains north of 30%. That stands in sharp contrast to the roughly 10% average 12-month return historically associated with a VIX below 20.” – NFM-25383AO (3/26)
In the past, through periods of volatility, stock market performance has in fact been strong. But the takeaway from the piece, and as we have communicated in the past, is, “while historical data can help frame expectations, it offers no guarantees. Market history provides context – not destiny. In periods of uncertainty, investors are best served by staying anchored to long-term fundamentals, maintaining disciplined portfolio allocations, and making decisions aligned with their risk tolerance. The market backdrop may be shifting, but the principles that underpin investment resilience remain unchanged.” – NFM-25383AO (3/26)
We would ask that you review the attached piece at your convenience and please let us know if you have any questions or if you would like to discuss it further. And as we always end this correspondence, please remember that regardless of current momentum and regardless of the key takeaways in this weekly perspective, we will continue to monitor and manage with a thoughtful approach based on your specific long-term objectives. Thank you for your continued confidence and look forward to speaking soon.
