Stocktake: More market volatility ahead

Risk is being repriced as central bankers move toward a new regime of higher rates

January 2022 has been a turbulent month, particularly for the Nasdaq. Photograph: iStock
January 2022 has been a turbulent month, particularly for the Nasdaq. Photograph: iStock

Volatility is back. We saw some extraordinary trading last week, particularly on Monday, when the S&P 500 and the tech-heavy Nasdaq fell 4 per cent before ending the day higher. Wall Street’s fear index, the Vix, briefly hit 38 – in line with levels often seen near market bottoms.

Market panic and the subsequent U-turn prompted many to wonder if a bottom is near. However, data from money manager and technical strategist Steve Deppe suggest large intra-day reversals and snapback rallies are often seen in times of turbulence, indicating things will likely remain volatile for some time.

That’s echoed by LPL Financial, which says big swings “tend to signal more market volatility ahead”.

Repricing market risk as central bankers aim to usher in a new monetary-policy regime means uncertainty is higher than usual right now. Buckle up.

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Proinsias O'Mahony

Proinsias O'Mahony

Proinsias O’Mahony, a contributor to The Irish Times, writes the weekly Stocktake column