Market Experience Most Volatile Week Since Pandemic — Key Takeaways

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The past week on Wall Street has been nothing short of tumultuous. While the S&P 500 ended the week nearly unchanged, investors’ experiences over these five days could shape the market’s future direction.

S&P 500’s Volatile Performance

The week began with the S&P 500 experiencing its worst day since 2022, only to see its best day since that same year by Thursday. The 10-year Treasury yield, which began the week below 3.7%, finished around 4%. Despite the fluctuations, the Cboe Volatility Index (VIX), Wall Street’s “fear gauge,” ended the week lower, even after spiking to 65 on Monday—its highest level since 2020.

By Friday, the market had stabilized, with the S&P 500 ending the week down less than 0.1% in a relatively calm session.

Insights from Market Analysts

Tim Hayes, Chief Global Investment Strategist at Ned Davis Research, remarked on Thursday that despite recent volatility, the market does not exhibit the characteristics of a bear market. “Currently, with inflation under control globally and recession evidence in short supply, the recent volatility has produced correction weakness but lacks the characteristics of a bear market,” Hayes stated.

Supporting Hayes’ view, Bespoke Investment Group noted that over two-thirds of stocks in the S&P 500 were still trading above their 200-day moving average—a positive indicator for chart analysts.

In the bond market, the interest rate fluctuations did not appear to alarm investors in high-quality corporate debt. Gennadiy Goldberg, Head of U.S. Rates Strategy at TD Securities, told CNBC, “Investment grade spreads held in. You had the single biggest daily VIX spike of all time, and yet IG credit didn’t really widen all that significantly.”

Resilience in Global Markets

Even in Japan, where the stock market and yen saw significant moves, there were signs of resilience. The Nikkei 225 Index, after suffering its worst day in decades on Monday, ended the week down less than 3%. Jeremy Schwartz, Chief Global Investment Strategist at WisdomTree, likened the situation to a 1987-style crash, but noted that it was “one 15-basis point move from the Bank of Japan that doesn’t seem to have changed the real fundamental outlook for these companies.”

Reasons for Concern

Despite signs of resilience, there are reasons for caution. Peter Berezin, Chief Global Strategist at BCA Research, warned that some of the key drivers of the bull market are losing momentum. “It is possible that the recovery will continue for another week or so, but ultimately, stocks will fall to fresh lows. The storylines around both AI-linked tech stocks and the global economy are likely to get worse rather than better,” Berezin explained.

Furthermore, some analysts caution that issues contributing to the initial market drop, such as the unwind of the carry trade with the yen, are not fully resolved. Frank Gretz, Technical Analyst at Wellington Shields, noted, “Getting out of these sharp selloffs can itself be a process, as the recent action has made clear. The process usually involves the so-called ‘test’ of the low or even a lower low. All of this could wreak a little havoc with the seasonal pattern, which itself is no prize.”

The week’s trading also included several weak closes and suspicious counter-rallies, raising eyebrows among market watchers. Tom Fitzpatrick, Managing Director at RJ O’Brien & Associates, remarked that Thursday’s rally, following the often overlooked weekly jobless claims report, suggests that “markets are broken” and predicted that the rebound won’t last. “The bias here is further short-term strength before likely renewed losses,” Fitzpatrick concluded.

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