The whipsaw of volatility continued on Thursday as the Dow plunged as much as 600 points before it resuscitated itself back to life and well into positive territory. The Dow finished over 250 points after Wednesday saw it reach a historic 1,000-point gain.
The initial trade war concerns quickly left the minds of investors an hour before Thursday’s session closed, capping off another wild ride in the markets.
“The uncertainty will continue to weigh on the market,” said Dave Campbell, principal at BOS. “I think that’s going to help drive the volatility as we roll forward because I don’t think it’s going to be a clean path to an agreement or some kind of resolution.”
The S&P 500 and Nasdaq Composite both finished in the green, climbing 0.84 percent and 0.4 percent, respectively. The major indexes are still below their 200-day moving averages after hovering above that level for most of 2018.
JP Morgan Sees Window of Opportunity
As 2018 becomes 2019, investors can wash their hands of the last few months of volatility, and according to multinational investment bank JP Morgan, it’s the perfect time to reload on U.S. equities.
With one and a half sessions left in the month, it’s been a December to forget–the Dow Jones Industrial Average has slid 10.42 percent, while the S&P 500 has lost 10.60 percent. In a one-month span, the Nasdaq Composite has shed 10 percent.
However, it could be a classic case of “buy the dip,” especially if trigger events like a rate pause or a tangible trade agreement between the United States and China boost the markets. On the topic of the former, a more dovish Fed can certainly help that cause.
“Signs of capitulation by institutional investors are creating a window of opportunity for equity markets into Q1 assuming the Fed reacts to market stress,” J.P. Morgan analyst Nikolaos Panigirtzoglou said in a note to investors on Friday.
However, the lack of a positive trigger event could cause markets to resume their downward trajectory of the past few months.
“If such dovish shift does not materialize and the yield curve inversion fails to improve, any equity rally in Q1 would most likely be short lived,” Panigirtzoglou added.
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