Volatility Speaks: Investors were Warned. Stock Market Update, Friday January 23, 2026

Well, that didn’t take long. We discussed the likelihood of elevated volatility in the 1q26 last week, and boom, over the weekend President Trumps re-ramping Tariff restrictions in front of his Davos speech and demanding Greenland concessions from Europe caused an explosion in volatility along with a selloff in long treasury yields on the fear of higher inflation or a greater risk premium for holding USA Treasuries.

His threat to impose 10% tariffs on European nations that don’t follow his lead met with outrage across Europe and the rest of the globe. Leaders in Europe planned an emergency plan to discuss tariffs on €93 billion ($109 billion) of US goods.

In less than half a trading day, the S&P 500 Index wiped its YTD gain in 2026.  Returning from a long MLK holiday weekend, the S&P 500 fell -2.1% Tuesday, its biggest drop since October. Technology stocks were the biggest losers on the day. The Dow Jones Industrial Average dropped -1.8%. The Nasdaq composite shed -2.4%.

As we said in our weekend update to start the year, “He’s back”, referring to the Presidents history of Thursday afternoon or weekend tweets and position changes that surfaced in 2018 in his first term 2^nd year.

Besides the weekend demands of the President, the markets flipped from complacent to volatile with investors bracing for the president’s speech at the World Economic Forum in Davos, the US Supreme Court’s expected decision on the legality of key elements of Trump’s trade agenda, and an announcement of the next Federal Reserve chair.

Do any of these items materially change the outlook for earnings in the S&P500 over the next 3-4 qtrs? Given the BBB accelerated depreciation provision? Given the tax law changes that should help consumer cash flow in the 2q? Doubtful.  But marginally, they do raise concerns about higher inflation and slower growth which translate into lower valuations.

The CBOE Volatility Index (VIX), or “fear gauge,” surged past 20.00 threshold on January 20, 2026, marking a shift in sentiment as many investors new year’s optimism of “goldilocks” collided with a wall of geopolitical and fundamental headwinds. The Vix index closed at 20.6 Tuesday, a nearly 28% jump in a single session. Much as we previewed in our 2026 outlook and highlighted just the prior week, the index signaled a short-term end to the low-volatility environment that characterized the 2^nd to 4^th quarters of 2025 post Aprils Tariff tantrum.  The recent spike was caused by an ultimatum from the White House regarding European trade, some negative EPS revisions, and a spike in inflation expectations.

The immediate implications of this volatility spike were profound, as the cost of portfolio protection over the next 30 days skyrocketed and the appetite for tech and growth stocks reversed. With the VIX trading above its historical average, many market participants are now bracing for a period of heightened turbulence.

But I like to compare the Vix index versus tradeable VIX futures.

Here’s what it looked like a week ago. The data is on the left, the graph on the right.  I like to call this shape, steep but cheap.  That is relatively cheap to buy protection for a portfolio for 30-45 days.

Here’s the current shape as of Tuesday the 20^th close.

This structure is dramatically different than just 1-2 weeks ago as it is now approaching a flat Vol curve where the cost to protect a portfolio for a few weeks, or even a few days, is the same as it would be for protecting for 5-6 months. We’ve discussed this dynamic many times the last 7 years on stock talk.  In simple terms, we are nearing panic levels short term to protect one’s portfolios over the next 1-2 months.

Is panic super high?  Screaming an off the charts, step in and buy all those stocks and assets you think you missed out on the last 10-12 months? Not yet, as when that happens, and when investors are forced to buy protection, not just volunteering to buy, the cost of near term protection can reach a premium to forward costs.  A premium that has exceeded 25-40% under times of severe panic and distress.  The financial term for this type of structure is “backwardization”. When near term protection costs far exceed future costs.  Does this structure mmake logical sense in the protection markets?  Over months and quarters no of course not.  Why would you spend more for protection that only lasts 1-4 weeks when you can get more or longer tail protection that lasts 3-6 months for the same costs?

The good news is the structure, even though its approaching flat still says the same thing to me, market participants are likely to “Buy the dip” if/when forward vol futures crosses the 22 levels and the front months of the vol curve rose and caught up to that level. The first level looks to be around 6600-6660.The “insurance markets” of the stock market, the options markets, are hinting that buyers would flood in.  Since we never had a parabolic and extended move up in late December or early January, the odds of dropping upwards of -10% seems to have declined, not risen.  Of course, all this is to be seen over the coming months.

Investors, unfortunately 2026 has started off “fast and furious” in a negative way for volatility.  This was a risk our investment team had entering 2026 and why the first video of 2026 was titled “Patience” after the Guns and Roses rock ballad.  The first half of 2026 is one of those years, the options markets were hinting at a real BTD moment would come later in the 1q.  That pullback has begun but neither price nor time looks like it’s completed.

The good news is that our investment team has experience in these types of markets. Remember investors that elevated volatility also means elevated opportunity, for longer term investors.  Historically, investors’ biggest incremental returns come from investing when volatility is high, not low, and markets are down and others are either acting emotionally or worse yet being forced to sell, when they really should be pushing their chips into the center of the table and adding to investments.

What does all this mean to you?

Our advice to you is to keep following our investment content on our Oak Harvest Website and our YouTube Channels and we will be addressing our 2026 Market Outlook on —Jan 29.2026 in a YouTube live stream with Troy, Charles, and myself.  Send some questions in advance if you want any special investment topics addressed.

Investors, whether you desire growth or income, or a combination of both in your portfolio, the entire OHFG team is here for our clients doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.

Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free visit: https://click2retire.com/lets-connect