A look at the recent S&P/ASX 200 Index (ASX: XJO) price charts is enough to give even a seasoned sailor motion sickness.
Indeed, Australia's benchmark index has been making some historically outsized daily moves these past few days.
Here's what I mean.
On Friday, the ASX 200 dropped 2.4% before plunging a precipitous 4.2% on Monday. Yesterday, it looked like the worst of the selling might be over, with investors piling back in to send the benchmark index up 2.3% at close.
And today, well, we're back in the trough.
In morning trade on Wednesday, the ASX 200 is down 1.9%.
This sees the index down 13.9% since the all-time closing high on 14 February.
Now, if this is of any comfort, it's not just the ASX 200 that's undergoing wild volatility.
We're seeing the same thing with stock markets around the world.
US markets, which have been charging ahead of Aussie stocks over the past year-plus, are now also leading the way down.
Yesterday (overnight Aussie time), the S&P 500 Index (SP: .INX) closed down 1.6%. The S&P 500 is now down 18.9% since 19 February.
And tech stocks are taking an even bigger hit. With the Nasdaq Composite Index (NASDAQ: .IXIC) closing down 2.2% yesterday, the tech-heavy index is now down 23.9% since 19 February, officially in bear market territory.
So, what's going on?
Image source: Getty Images
Why are global markets and the ASX 200 so volatile lately
ASX 200 investors, and investors the world over, have the new trade policies of US President Donald Trump to thank for the wild ride we're enduring.
If markets have learned anything over the past few weeks, it's not to dismiss Trump's tariff threats as bluster.
Last week marked Trump's 'Liberation Day'. A day when he imposed sweeping tariffs impacting some 60 nations. Australia was hit with a 10% impost. China was initially targeted with a 34% duty, but that may now rise to 104% after China's government enacted retaliatory tariffs against the US.
With those kinds of eye-watering tariffs taking a sledgehammer to the established (if potentially unfair) global trading order, and with the future of those tariffs remaining wholly unknown, ASX 200 investors have been facing a wall of uncertainty.
What are the experts saying?
Here's what these leading experts are saying about the global market volatility that's also been rocking the ASX 200 (quotes courtesy of Bloomberg).
Que Nguyen at Research Affiliates LLC:
The volatility reflects the new situation in which no one knows what the rules of road are, or even what the desired destination is. Until investors reset expectations, or those rules and goals are better understood, markets will continue these wild swings between hope and fear.
Scott Ladner at Horizon Investments:
The fundamental reason for the drawdown has been policy uncertainty – it's functionally impossible to put in a bottom until that fundamental reason has been resolved, or at least until there is directional clarity on it.
Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments:
When volatility acts like this, liquidity dries up and there's often times where things can move in ways that don't necessarily make sense.
Andrea DiCenso, co-portfolio manager of the Alpha Strategies Team at Loomis, Sayles & Co:
We're just going to be living through a barrage of headlines, every single day, all day: Who did the administration meet with? What was the outcome? And then we go back and forth, and back and forth.
Foolish ASX 200 takeaway
Having started with a boating analogy, we'll end with one too.
First, don't even look at those lifeboats. The time to abandon ship was before the storm hit. Not during its apex.
The best advice to avoid discomfort during a wild journey at sea is to keep your eye on the horizon. Or your destination, in other words. Don't focus on each incoming wave.
With the ASX 200 in high volatility mode, the same advice applies to your stock holdings. In most cases, I expect the rationale that saw you buy those stocks still holds true over the longer term.
The seas may be rough at the moment. But with history as our guide, we know they're bound to calm down sooner or later.
And then all of those quality ASX 200 shares that have gotten unfairly beaten down in the storm will most likely come roaring back.
