Volatility loves company — get ready for further big swings in the market
Stocks could do anything in the coming weeks, but volatility really does beget volatility. Strap in.
Volatility is back.
Yesterday’s dramatic 4.8% tariff-charged sell-off was the S&P 500’s biggest daily drop since June 11, 2020 — back when when the world was grappling with the novel coronavirus. Today, global markets have picked up right where they left off, dropping around the world after China announced 34% retaliatory tariffs on US goods.
Leading yesterday’s decline were the tech giants, with Apple mirroring the wider market by notching its worst day since Covid as the iPhone maker shed more than $310 billion in market cap. Nvidia and its smaller chipmaking peer Broadcom both had a rough day.
Outside of Big Tech, it was mostly a sea of red, with retailers also hit hard — most notably Nike, which has enormous offshore supply chains in Vietnam and China.
We won’t presume to have any idea what the market will do over the coming weeks and months, except to say that it really is likely to be a bumpy ride. Indeed, volatility tends to linger. A simple analysis of the S&P 500 finds that once the index has moved more than 2% — in either direction — the following day has seen an average move of 1.72%. That’s roughly double the index’s typical daily swing of 0.88%. SPDR S&P 500 Trust futures are currently down 3.1%.
Don’t just take my word for it: the Volatility Index, a market-based measure of how much investors expect stock prices to fluctuate over the coming month, spiked to over 40 this morning, which if sustained would be its highest close in five years.
