Following the return of market volatility after roughly 18 months of slumber, investors are preparing for more turbulence over the coming period, writes David Uberti for The Wall Street Journal.

Turbulence has mounted for about a month, culminating last week when the S&P 500 logged both its best and worst days since 2022. Traders have now wound down those investments that do best in calm conditions and retreated from bets that the sideways action would last.

The signs that we are entering a period of market volatility are unmistakable. There has been a once-in-a-generation rout in Japanese stocks, a streak of seesawing Nasdaq Composite sessions that was last recorded at the height of the pandemic, and the Magnificent 7 group of tech giants recorded half-trillion-dollar daily swings in value.

The biggest question for investors right now is will the volatility continue.

Eric Metz, chief investment officer at SpiderRock Advisors, said that daily swings in asset prices are not unusual.

“When you’re low for so long, you’re bound to have a pickup,” he said. “When it changes, it changes fast.”

Last week’s jolt represents the beginning of a more anxious phase for a record-breaking market. For example, Wall Street is already questioning the potential payoffs of artificial intelligence, which could lead to a potentially massive rotation into other stocks. This would derail indexes that have been dominated by tech shares in recent years.

And while underlying measures of volatility retreated at the start of this week, some investors still believe there is reason to worry in a market where several AI-focused tech giants command huge sway over stock indexes.

“People think the panic is over and are loading back up,” said Peter Tchir, head of macro strategy at Academy Securities. “I don’t think that we’ve tasted the panic yet.”

Read more about market volatility in The Wall Street Journal.

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