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The S&P 500 (^GSPC) surged 2.3% on Thursday, the index’s biggest one-day gain so far in 2024.
Just three days ago, the S&P 500 recorded its biggest one-day drop of 2024.
Market volatility has been trending upward since mid-July, with the CBOE Volatility Index (^VIX) briefly surging from the teens to above 65 on Monday.
But as this week’s chart shows, market volatility depends largely on the magnitude of market movements, not their direction.
As DataTrek’s Nicholas Colas wrote this week, high levels of volatility typically hit one- to three-month returns, meaning the common association of volatility with “downs” isn’t entirely misleading.
But while markets are never predictable in the short term, they are especially unpredictable when things are volatile. As Colas joked, who would have thought that it would be jobless claims, of all things, that would lead to the biggest day of the year?
And having the best and worst days so close together on the calendar speaks to advice Steve Sosnick, chief strategist at Interactive Brokers, gave to Julie Hyman in a column earlier this week: Investors should strongly consider doing nothing.
The lesson that big gains and big losses happen together may be hard to grasp, but it shows up everywhere. And after this week, I can’t help but think about BMO chief investment strategist Brian Belski’s updated 2024 forecast from May.
He made one of Wall Street’s biggest predictions at the time – a year-end target price for the S&P 500 of 5,600 – and his bullish outlook was based on the fact that most bull markets experience an average second-year drop of 9.4%, suggesting the possibility of a big sell-off in the coming months.
And with Monday’s crash, down 8.5% from the recent high, Belski’s prediction appears to have come true — at least for the first half of it.
But you can’t have one without the other, said Colas, pointing to the old adage that “volatility is the price you pay for stock market returns.”
In other words, the purpose of money is to withstand fluctuations.
Ethan Wolfman is a senior editor at Yahoo Finance and runs the newsletter. Follow him on X Follow.
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