Stock Volatility Surge Amid Tariff Announcements

The U.S. stock market is currently exhibiting signs of a "kangaroo market," a term used to describe unpredictable fluctuations with no clear long-term direction. Last week’s stock volatility, spurred by President Trump's announcement of sweeping tariffs, highlighted this market behaviour.

The Cboe Volatility Index (VIX), often called the "fear index," nearly tripled following the announcement and remained elevated even after Trump delayed most of the tariffs. Despite a strong rally midweek, the VIX stayed above 40 for six straight days - an unusually high level, signaling ongoing uncertainty in the market. 

Bull, Bear and Kangaroo Market 

A bull market is characterized by sustained rising prices and widespread investor confidence, typically fueled by strong economic growth. In contrast, a bear market sees prolonged price declines, often driven by economic downturns or widespread pessimism. A kangaroo market, however, is marked by erratic ups and downs with no clear trend, leaving investors uncertain and markets reactive to short-term events rather than long-term fundamentals.

Uncertainty Fueled by Erratic Trade Policies

This unpredictable market reflects the erratic nature of the White House’s trade policy, which has caused considerable turbulence. Trump’s tariff threats, announcements, delays, and reversals have left businesses and consumers in limbo, fueling market instability. “So in essence uncertainty has been reduced a bit,” said Kristian Kerr of LPL Financial, “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.” Gina Bolvin of Bolvin Wealth Management echoed the sentiment: “However, uncertainty looms over what happens after the 90-day period, leaving investors to grapple with potential volatility ahead.” These ongoing policy shifts are exacerbating the kangaroo market dynamics, characterized by sharp, unpredictable moves rather than steady trends. 

Opportunities for Long-Term Investors

Despite the market’s erratic movements, there are opportunities for long-term investors. The heightened volatility, marked by panic selling, has created chances for value-driven investing. “Dislocations like this can present chances to buy solid assets at prices that reflect panic rather than reality,” said Kerr. This situation aligns with the unpredictable nature of a kangaroo market, where short-term chaos can often lead to long-term gains for those with a steady outlook. 

Bolvin added, “This underscores the importance of staying fully invested, particularly in a market as reactive and headline-driven as this one.” She sympathized with investors who exited prematurely, only to miss the rebound, further reinforcing the idea that patience and discipline are essential, especially when navigating a kangaroo market’s volatility. 

Conclusion 

In times of heightened uncertainty, it’s more important than ever for investors to stay grounded, think long-term, and embrace a diversified strategy. While equities may swing wildly, other assets - like gold - can serve as a hedge and provide stability. Gold has historically performed well during periods of economic stress and market instability, making it a valuable addition to a balanced portfolio. By staying calm, spreading risk across asset classes, and focusing on long-term fundamentals, investors can not only weather the storm of a kangaroo market but come out stronger on the other side.