Despite surging volatility and rising rates, no need to panic — yet, says Credit Suisse

After an eerily quiet couple of years for the markets, volatility has returned with a vengeance.

Equity markets are seeing wild intraday swings, Treasury volatility has spiked, and it's all coming after more than a year of virtually no market turbulence.

According to one major Wall Street firm, however, the return of major market moves and the expectation for a rise in interest rates this year is no reason for investors to panic.

Credit Suisse equity derivative strategist Mandy Xu told CNBC's "Trading Nation" on Tuesday that the broader economic environment remains quite healthy and a prolonged period of market volatility at this point simply does not appear in the cards.

"If you go back and look at historical regimes where volatility was sustained, it's usually accompanied by a fundamental deterioration in the market, whether it's a risk of recession, or a sovereign debt crisis, or a credit crisis. Against the current backdrop, which is very much positive — whether we are looking at positive earnings growth, synchronized global growth across all the major world economies, still subdued levels of inflation — I think against this backdrop it's going to be very hard to see sustained levels of elevated volatility," Xu said, adding that she would expect at this point to see an eventual normalization of volatility.

Strategists across Wall Street, including Xu, contended that while last Friday's market sell-off was somewhat fundamentally driven, spurred by an employment report that reflected a pickup in average hourly wages, the dramatic decline on Monday appeared to be technically driven. That is to say, for example, the S&P 500 breached key technical levels to the downside, like its 50-day moving average.

Other facets of the sell-off earlier this week suggest to Xu there is little to no panic in the market.

While the decline on Monday would imply panicky investor sentiment, in terms of the market move's sheer speed and magnitude (after all, the Dow saw its largest point drop ever), "in terms of actual flows that we saw on our desk, it was not panic," Xu said.

"We did not have customers coming in to panic buying of protection, or unloading positions," the strategist added. She also noted that on Tuesday investors were in fact taking advantage of the volatility and unwinding some previously purchased so-called "protection" for portfolios.

On Wednesday afternoon, the S&P 500 was little changed on the session, the Dow Jones industrial average was up modestly and the Nasdaq Composite fell half a percent.

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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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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