On Friday, the Cboe Volatility Index, known as Wall Street's 'fear gauge', surged to its highest level in eight months as U.S. stocks began trading significantly lower due to China's implementation of new tariffs on all U.S. goods in response to the broad tariffs imposed by the Trump administration. The index, which measures investors' concerns about the market's short-term prospects, spiked by 15.54 points to reach 45.56, a level not seen since August. Currently, it stands at 38.27, up by 8.25 points.

According to Joe Tigay, a portfolio manager at Rational Equity Armor Fund, a VIX reading of 40 indicates heightened fear, suggesting more than just a typical market decline. This level is usually associated with factors like credit or margin risks that could lead to broader contagion across various asset classes. With the S&P 500 having dropped around 11% so far this year, investors are closely monitoring the VIX as a barometer of market anxiety.

Historically, during the last ten corrections when the S&P 500 fell by 10% or more from recent highs, the VIX peaked at an average of 37 before the downward trend subsided.