Why this week’s market volatility may mean ‘more stomach-churning moves’ ahead

If it feels as if the stock market has whiplash, that's because in a way, it does. Its fluctuations on Monday and Tuesday were extraordinarily volatile. The Dow, S&P 500 and Nasdaq bounced in and out of negative territory on Tuesday, surging into the market close, after plunging the session prior.

This kind of market turbulence, which came about after a prolonged period of effectively no broad equity volatility, is statistically rare.

Still, larger and more "stomach-churning moves" are likely to become the norm, said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, on CNBC's "Trading Nation." And that's due in part to one factor: shifts in central bank policy. Here are his reasons why.

• The Dow's dramatic drop on Monday was its largest point loss in history, though it was not nearly as historically significant in terms of its percentage decline (a little more than 6 percent off at session lows).

• At the same time, the backdrop is quite different from wild market swings in recent history.

• For this first time since the financial crisis, central banks around the world are moving away from lenient monetary policy and toward normalization and higher interest rates.

• As policy tightening gets underway in and out of the U.S., equity investors cannot rely on so-called "easy money," which will likely spur more volatility in the future.

Bottom line: Market volatility will likely become more frequent as interest rates are expected to rise globally, according to one foreign exchange strategist.

Vote
Vote to see results
Total Votes:

Not a Scientific Survey. Results may not total 100% due to rounding.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more

Connect