- Reuters/Ajay Verma
Stocks started the week on a firm footing Monday, as the Nasdaq returned to positive territory for the year.
Around 10 a.m. ET, the Dow was up 180 points, the S&P 500 was up 22, and the Nasdaq was up 45.
But volatility continues to plague the markets.
Monday’s activity follows the biggest intraday reversal from a plunge in four years, when all indexes ended Friday up 1% with the Dow gaining 200 points after a not-so-great jobs report.
While this two-day upward trend may feel good, t’s notable that this recent bout of good news comes after the stocks zigzagged dramatically in August and September.
All of this feels eerily similar.
People who are invested in the stock market might not want to hear this, but this crazy, multimonth-long volatility is not unlike what we see in the middle of a stock market crash. (The fact it has a small chance of happening does not mean that it’s not worth acknowledging.)
Generally, when people think about the tech and credit bubbles in the stock market, they tend to visualize a single crazy stock plunge that just keeps going and going in one direction: down.
When stock bubbles come to a head, however, they actually tend to make wild swings. In other words, they don’t just suddenly burst – it’s more of a wild up-and-down process.
In a January note to clients, UBS strategist Julian Emanuel zoomed in on the stock market action during the previous two major market peaks to illustrate this important observation.
And for what it’s worth, this is what the stock market has looked like over the past month and a half.
(Emanuel’s charts, it should be noted, span much longer time frames.)
- Andy Kiersz/Business Insider
It is important to emphasize that these three charts do not predict a crash.
Rather, it is merely interesting to point out that the recent volatility in the markets is not without precedent. After all, it is extremely difficult for investors and economists to tell whether the market is in a bubble and, if it is, whether that bubble is bursting.
But given the recent volatility, one can’t help wondering whether the stock market is crashing. It will be a while, however, before we can confirm whether that’s actually happening.