When the Index Falls 4%, the Real Story Is Underneath
Wall Street’s midterm post-election celebration lasted one session. US stocks plunged on Thursday as artificial intelligence (AI) and chip stocks sold off, erasing the gains from Wednesday’s rally. The S&P 500 fell about 4%, the Nasdaq Composite dropped 5.5% to close in correction territory, and the Dow Jones Industrial Average lost more than 1,800 points.
The fear gauge responded in kind. The VIX1 jumped more than 65% intraday, its biggest one-day surge in over two years.
More volatility is possible as many market participants find themselves in crowded trades and are offsides on their AI bets.
Dispersion on Display
By the close, 430 of the S&P 500’s 503 stocks had fallen, while 73 rose.2 Within that, the gap between the best and worst performers was enormous. Several chip names fell significantly in the session, while AppLovin gained more than 30% after its earnings report.
Dispersion is a reminder that index-level returns can hide a lot of movement underneath. Even after Thursday’s drop, the market remains up 9% year-to-date. Beneath that headline, many investors may not realize that dispersion—the difference in return between the top and bottom stock performers—has been wide.
Why It Matters for Taxable Investors
No investor wants losses, but volatility is inevitable, and days like yesterday can provide a silver lining by way of long-term tax assets. Tax-loss harvesting means selling a security that has declined to realize a capital loss, which can offset gains elsewhere in a portfolio at a later date. Wide dispersion creates more of these opportunities, even in a year when the overall market is up.
The catch is that sharp drawdowns can appear and reverse within days, so acting on them calls for a disciplined, systematic process rather than guesswork.
What This Looked Like in Practice
That dynamic played out in real time on Thursday. As the selloff unfolded, our Canvas accounts realized almost US$20 million in losses, tipping us over US$1 billion in realized losses for clients year-to-date.
The Takeaway
One day doesn’t make a trend, and volatility is rarely predictable. But it’s a useful reminder to look beneath the headline index, understand what you own and how concentrated it is, and use periods of turbulence to review portfolios and tax positions with a plan in mind.
Data is attributable to Franklin Templeton and general market index data, unless otherwise defined. Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges.
Endnotes
- Cboe Market Volatility Index (VIX): Measures market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Often called the “fear gauge,” lower readings suggest a perceived low-risk environment, while higher readings suggest a period of higher volatility.
- Source: TickerTiles as of November 6, 2026.
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