Wall Street’s volatility barometer, the Cboe Volatility Index (VIX), soared 43% on Friday to 42.93 — its highest mark since April 2020 — as global markets buckled under escalating tariff tensions and economic uncertainty. The spike came amid a broader sell-off in equities, driven by U.S. President Donald Trump’s sweeping reciprocal tariffs and Federal Reserve Chair Jerome Powell’s sobering outlook on inflation and growth.
The VIX touched an intraday high of 45.56, up from its previous close of 30.02, reflecting the most acute investor anxiety seen since the COVID-19 pandemic crash. The surge comes on the back of Thursday’s 40% rally in the index, as the Dow, S&P 500, and Nasdaq all saw steep losses.
Speaking in Arlington, Virginia, Powell said the central bank is facing a “highly uncertain outlook” following Trump’s unexpected tariff escalation. He warned that the new levies — a baseline 10% duty applied to over 180 countries with some as high as 46% — are “significantly larger than expected” and will likely lead to “higher inflation and slower growth.”
Powell also emphasized that the Fed is in no rush to cut or hike interest rates until it sees more clarity. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy,” he said.
Meanwhile, Trump remained steadfast in the face of financial market turmoil, urging Americans to “invest in the U.S.” and declaring his policies “will never change” in a Friday morning post on Truth Social.
The geopolitical backdrop intensified as well, with China retaliating by imposing a 34% tariff on all U.S. goods and placing several American firms on its “unreliable entities list.” In Europe, governments debated emergency responses after markets slumped and recession forecasts were revised higher.
Economists like José Torres of Interactive Brokers say the VIX’s spike is no overreaction. “The risk of a global recession is no longer distant,” Torres said. “Tariffs, austerity, and retaliatory trade actions are compounding stress on consumers and investors alike.”
With Treasury yields falling sharply and the VIX continuing to rise, market participants appear braced for further volatility. The week’s events mark a potential turning point in global markets, as trade tensions and political standoffs weigh heavily on growth expectations across economies.
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