Key Takeaways
- President Trump’s unpredictable tariff policies have nudged stock volatility to its highest level in years and hammered nearly every corner of the stock market.
- Experts say a 90-day pause on “reciprocal” tariffs, announced on Wednesday, reduces some of the uncertainty hanging over markets and boardrooms.
- While substantial uncertainty persists, most experts remind investors that long-term investment strategies often benefit from panic selling like that seen throughout the last week and a half.
President Trump’s unpredictable trade policies have pushed stock volatility up to its highest level in years, creating substantial uncertainty and, some say, opportunity on Wall Street.
Stock volatility jumped last week when President Trump announced sweeping tariffs that would raise the effective U.S. tariff rate to its highest level in more than a century. The Cboe Volatility Index (VIX), sometimes referred to as the fear index, nearly tripled between Trump’s tariff announcement last Wednesday and Monday morning when stocks opened at their lowest level in more than a year. The VIX has remained elevated despite a historic stock rally on Wednesday when Trump delayed nearly all of the tariffs. The index traded above 40, a level it hit only once in all of 2023 and 2024, for a sixth consecutive day on Friday.
The stock market’s volatility matches the unpredictability of the White House’s trade policy. Trump has announced, delayed, escalated, and watered down his tariff threats repeatedly during the first months of his presidency, putting businesses and consumers on tenterhooks. Mentions of “chaos” on earnings calls and at corporate conferences have skyrocketed in recent weeks, according to analysis from data provider AlphaSense.
Uncertainty Will Continue to Hang Over Market
The 90-day pause eliminates some of the risk hanging over markets, according to Kristian Kerr, Head of Macro Strategy at LPL Financial, who noted countries and companies could negotiate lower rates over the next three months. “So in essence uncertainty has been reduced a bit,” he said, “but the erratic nature of US policy will remain an overhang and keep uncertainty elevated versus norms until we get more definitive clarity on trade policy.”
Wall Street expects more twists and turns in the coming months. The 90-day pause “may provide companies with a clearer backdrop for their guidance, offering some relief to a market hungry for direction,” wrote Gina Bolvin, President of Bolvin Wealth Management in a note on Wednesday. “However, uncertainty looms over what happens after the 90-day period, leaving investors to grapple with potential volatility ahead.”
Opportunities Emerge for Long-Term Investors
Kerr and Bolvin both recommend investors take the long view. Trading volume hit a record high last Friday and again on Monday, evidence that “emotional selling had firmly taken over,” according to Kerr. “When valuations overshoot to irrational extremes, opportunities emerge for investors willing to think long-term,” he said. “Dislocations like this can present chances to buy solid assets at prices that reflect panic rather than reality.”
“I empathize with those who sold out yesterday and are now watching the rebound from the sidelines,” Bolvin wrote on Wednesday. “This underscores the importance of staying fully invested, particularly in a market as reactive and headline-driven as this one.”
