Historic Turbulence Ahead

3Fourteen Research

Warren Pies

Research

11 Pages

3Fourteen Research analyzes periods of historic market turbulence, focusing on how volatility regimes evolve and what they imply for future returns. The paper highlights that extreme volatility spikes, like those seen in 2020, tend to cluster and often precede below average returns despite strong rebounds.

Key Takeaways

Volatility Clusters Persist: After volatility spikes above 40 VIX, markets experienced elevated turbulence for 6–12 months historically.
Post Crisis Return Drag: Following major drawdowns, equity returns averaged ~3–5% annually over the next 3 years, below long term averages.
Behavioral Overreactions Common: Sharp selloffs exceeding 30% often reversed quickly, with rebounds of 20%+ occurring within months.
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