Conventional wisdom treats a low VIX as complacency and a high VIX as fear. The late 1990s tell a sharper story.
In 1995 and 1996, the VIX traded below average, and the S&P returned 37.2 percent and 22.7 percent, respectively. Calm and rising prices coexisted. In 1997 and 1998, the Asian crisis and LTCM pushed volatility above average, yet the S&P gained 33.1 percent and 28.2 percent. The 1999 break was different: the VIX stayed elevated in the absence of macro stress while the Nasdaq gained 85.6 percent. That signal preceded a 37.5 percent S&P drawdown from 2000 to 2002 (Source: Bloomberg).
What does this mean? When markets get exuberant enough that the VIX closes above 19.5, even as stocks rally, something may be wrong beneath the surface. It is a warning signal we watch for.
The VIX closed today at 17.9 and generally traded below 19.5 for the past month. Today’s market is not behaving like 1999. Volatility and price action are aligned with the healthier phases of the late 1990s expansion, not the speculative blow-off that ended it.
We will continue to monitor this bubble indicator and will flag it if the signal begins to turn.
Cboe Volatility Index (VIX)
Source: Bloomberg. VIX data as of May 13, 2026. Past performance does not guarantee future results.
Source: Bloomberg. VIX data as of May 13, 2026. Past performance does not guarantee future results.Let’s Talk
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