Recent volatility in the US stock market has prompted increased trading activity and new opportunities for Australian investors, according to market experts.
Greg Boland, Chief Strategy Officer at Tiger Brokers, has analysed the latest market developments in light of significant swings following the US government's announcement of new tariffs.
Boland stated, "The past two weeks have been some of the most volatile in US share market history after President Trump released his tariff policy on 2nd of April. The S&P 500 was smashed down by more than 10% in two days after the announcement ranking that day amongst the four worst performances over two days since World War II - the others being black Monday 1987, the Lehman Brothers collapse at the climax of the subprime mortgage crisis in 2008 and the start of the pandemic in 2020."
US Federal Reserve Chair Jerome Powell addressed the heightened uncertainty in a recent statement, noting that the US economy remained in a "solid position" despite signs of slowing growth in the first quarter compared to the same period last year. Powell remarked that households and businesses are reporting a sharp decline in sentiment and elevated uncertainty about the outlook, largely due to trade policy concerns. He confirmed that the Federal Reserve would maintain current interest rates pending further clarity.
Boland explained, "Before the speech many in the market have thought that the Federal Reserve may reduce interest rates to protect the US economy as it continues to slow. As the reality of his comments sunk in, the market was sold off with the Dow closing down 1.7%, the Nasdaq down 3.1% and the S&P 500 down 2.2%. Normally a sell off of this magnitude would be incredulous but we are all becoming immune to swings of 3% in the market given the carnage that has occurred in the past two weeks."
In assessing recent market performance, Boland noted, "In the past five days the best performer in the S&P 500 index is Newmont Mining which is up almost 15% and over 50%. In the Dow Nike has been the worst performer down almost 10% in the past 5 days and 29% YTD. The BATMMAAN stocks have struggled all year." The BATMMAAN stocks refer to a group of prominent technology companies, including NVIDIA, Tesla, Apple, Amazon and others, which have experienced significant trading volumes and fluctuating fortunes in recent months. This information was provided via Tiger Trade, according to Boland.
Tiger Brokers has seen a surge in new account registrations through its Tiger Trade platform as retail investors take advantage of market lows. Boland shared insights on trading behaviour, stating, "With all this risk, there is also opportunity, and Tiger Brokers has seen a record number of sign-ups of new clients via Tiger Trade over the last couple of weeks as investors and traders alike are looking for opportunity while share prices are relatively low."
He continued, "So what are our customers doing? Well the highest volumes of trades in the past few weeks have been in the well-known BATMMAAN stocks, especially NVIDIA, Tesla, Apple, and Amazon. Index-related ETFs are also very popular, with a lot of focus on the NASDAQ Invesco QQQ ETF (QQQ), S&P 500 Vanguard ETF (VOO), and SPDR S&P 500 ETF (SPY). Leveraged ETFs such as ProShares TQQQ and SQQQ are also heavily traded. Investors will be looking to buy shares at favourable prices and hold for long periods of time. But why are they popping their heads above the parapet in these very volatile times?"
Boland pointed to market patterns that present opportunities for day traders, saying, "A look at today's S&P 500 Intraday chart may dgive us a clue. The index rallied for some time until Powell's speech and then was sold off. For the many day traders and short-term traders in Australia who trade the US market, this was a golden opportunity to short the market for the second half of the session in closing out the position just before the bell."
He further explained trading strategies in this environment: "Many will focus on one or two ETFs or stocks. They will be taking a short-term view on market direction (bullish or bearish) at the start of each trading session. If they anticipate a bearish tone on, say, the S&P 500, they will buy put options or short sell the SPY or VOO ETF. And if they see upside potential, they will buy calls or the underlying shares. They will place take-profit orders and place stop-limit orders that will trigger and close the position at a pre-determined profit or loss. In times of higher volatility they will likely trade less to preserve capital, and also because options premiums will be more expensive."
Traders are closely monitoring the VIX, the index which measures S&P 500 volatility, as a signal for potential shifts in market sentiment. "They will look at other measures of the market including the VIX which measures the volatility of the S&P 500 Index options. When it spikes it is often a signal that the sell-off in the index may be bottoming and it's time to buy. Traders can also buy puts on the VIX ETFs, as they think the VIX itself may fall as the market becomes more stable. Today however the VIXx jump 8.4% on the index sell off," Boland noted.
The US quarterly corporate reporting season has commenced amidst this backdrop of market turbulence. Boland highlighted, "Amid all this activity the regular quarterly reporting season commenced last Friday, with the major US banks reporting good results. Among the many reporting later this week, Dow component UnitedHealth reports on Friday (NZT), along with Netflix."
