Volatile Stock Market Experiences Major Swings in Early 2025

Editor’s note: “How to Build Wealth in a Volatile Stock Market” was previously published in March 2025 with the title, “Beyond the Ups and Downs: Building Wealth in a Volatile Stock Market.” It has since been updated to include the most relevant information available.

The Stock market has faced significant instability in early 2025. Since Donald Trump became the 47th President of the United States in late January, investors have navigated a tumultuous market.

Initially, markets remained relatively stable, remaining flat for a month. However, that changed quickly.

Between mid-February and mid-March, the S&P 500 fell 10% in just 20 trading days, driven by growing fears of a global trade war instigated by Trump. Those fears materialized on April 2, when Trump initiated his “Liberation Day” tariffs, leading to a historic two-day, 10% drop in the index—the fifth-worst two-day crash ever recorded.

A recovery soon followed.

One week later, Trump announced a 90-day suspension of those tariffs, spurring the market to rebound. The S&P 500 jumped 9.5% in a single session, contributing to an overall 20% recovery over the next month.

In just 90 days, the stock market experienced a 20% decline followed by a full recovery, a level of volatility reminiscent of the pandemic era. This shift is changing how investors are viewing political risks and policy impacts in 2025.

This period represents one of the most volatile stock market environments seen to date. Given Trump’s presidency’s policy changes, investors are questioning whether this volatility is the new normal for Wall Street.

Market Uncertainty Likely to Persist

Despite recent turmoil, I believe stock prices will rise in the coming years.

We are in the midst of the AI Boom, which typically lasts five to six years. Historical evidence from the Dot Com Boom illustrates this; from 1995 to 1999, the Nasdaq Composite increased about 582%, while the S&P nearly tripled.

This current AI Boom began in 2023, suggesting another two to three years of substantial growth for AI stocks, which should help lift the broader market.

However, expect a rocky path ahead…

Trump’s agenda aims to overhaul trade deals, alter military strategy, reduce federal spending, and re-shore American manufacturing. Each of these shifts brings significant change.

Regardless of the perceived value of these changes, they contribute to uncertainty—particularly for investors.

This uncertainty implies ongoing volatility, reflecting the conditions experienced over the past months.

Volatility Metrics Under Trump

Since Trump’s inauguration, notable market dynamics have emerged:

• Fastest 10% drop
  • The S&P fell over 12.1% within four sessions post-tariff announcement on April 2.
• Severe two-day crash
  • On April 3-4, the market dropped 10.5%, marking the fourth-worst two-day performance since 1950.
• Best single-day rally
  • On April 9, the S&P surged 9.5% after a tariff pause, marking its strongest one-day gain since October 2008.
• Longest win streak
  • On May 2, the S&P recorded its ninth consecutive day of gains, increasing about 10% over that span.
• High volatility index
  • The CBOE Volatility Index (VIX) nearly doubled, peaking at 27.86, indicating market fear.

This three-month period has set records.

For those anticipating a calmer market in the upcoming months, such an outlook may be overly optimistic.

Strategies for Navigating Current Market Conditions

Trump is committed to implementing his vision, likely resulting in sustained volatility throughout his term.

This reality can be daunting for buy-and-hold investors. Thus, adapting to become more than just a buy-and-hold investor is crucial.

Volatility provides significant opportunities for short-term traders.

Market fluctuations present chances to buy at lower prices and sell at higher ones.

While short-term trading carries risks, a quantitative system can help mitigate these challenges.

Introducing Auspex, a quantitative screening tool designed to optimize trading strategies during uncertain times.

It identifies stocks with:

• Growing earnings, revenues, and margins
• Positive trends in technical data
• Increased attention from analysts and traders

These stocks represent the strongest market opportunities available.

With just 30 minutes per month, investors can strategically position their portfolios for potential gains, making execution straightforward.

This system aims to equip investors to navigate and thrive in today’s challenging market.

_{On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.}