Wall Street trading explodes as stock rout sparks angst

Bloomberg

If you asked investors a few months ago what they’d remember about this year’s market, it would’ve been the storm of volatility that laid everything low in February.
That episode is starting to seem quaint. Maybe nothing out of the ordinary is happening to stocks by historical standards, but try telling that to traders, who instead of relaxing for the holidays just lived through one of the most trying stretches since the bull market began.
Losses have been unrelenting. In a year of big reversals, equities just notched their worst week since 2011, with the S&P 500 falling 7.1 percent and the Nasdaq Composite descending into a bear market. Equally troubling was the sheer volume descending on exchanges during a typically sleepy stretch.
Whipped up by option expirations, some 27 billion shares traded on US exchanges this week, the most for any two-day period in seven years. Trading this week was 40 percent higher than the average before Christmases going back to 2008. The holiday spirit has been replaced by panic.
“If you don’t have a few
anxieties in markets like this, I have no response,” said Tom Stringfellow, chief investment officer at Frost Investment Advisors. “The good news is the markets are closed on Christmas.”
It’s been a long time since investors lived through this torturous a decline, a point in
explaining their emotional response to volatility that by most standards remains fairly normal. While the Cboe Volatility Index surged above 30, it remains below its highs in February, late 2015 and during the European debt crisis.
Still, it only took about eight weeks for last winter’s meltdown to reach its nadir. The current sell-off has now lasted 13, and just featured declines of greater than 1.5 percent in five of the last six days. Protracted routs happen — it just takes a lot to remember anything this bad.
“The one at the beginning of the year was incredibly sharp, quick, and resolved itself quickly, and it was related all to the VIX. It took a little while to shake out but it didn’t take too terribly long,” Paul Nolte, a portfolio manager at Kingsview Asset Management, said.
“This has been going on and it’s been persistent now for the full quarter. It’s been a much more persistent decline with very few respites than what we saw in February.”
For some, that means get ready for the big one, perhaps a 20 percent drop that finally ends the longest S&P 500 bull market ever recorded. The index ended within 3 percent of that level. For others all the turbulence smells like opportunity, a chance to find bargains for when the rebound inevitably comes.
“We’re not down here just whining, we’re upbeat, saying, man this thing could have some explosive moves to it,” said Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas.
Fed’s Jerome Powell raised rates, said the pace may slow next year, and generally refused to offer investors the coddling they’d gotten used to under Janet Yellen and Ben Bernanke.

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