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‘Completely Bizarre’ Stock Moves Leave Traders Scratching Heads

Bloomberg logoBloomberg 12/28/2018 Abhishek Vishnoi, Min Jeong Lee and Matthew Burgess
A trader works on the floor of the New York Stock Exchange during the afternoon of September 5, 2014 in New York City.© Andrew Burton/Getty Images A trader works on the floor of the New York Stock Exchange during the afternoon of September 5, 2014 in New York City.

As a turbulent December in equity markets draws to a close, there’s one idea traders and investors can agree on: these are not usual times, especially for this time of year.

It’s “completely bizarre,” says Stephen Innes, head of trading for Asia Pacific at Oanda Corp. “It’s incredible just how harmful markets veer when sentiment slides.”

Innes has been taking profit on some winning investments, and snapping up blue-chip stocks whose valuations have dropped in the December sell-off, but for the most part he’s keeping his money on the sidelines. Like many other traders in Asia, he’s been watching events play out in the U.S. from a distance, amazed at what he sees.

The S&P 500 Index posted its biggest upward reversal since 2010 on Thursday, a day after the gauge capped its largest advance since 2009. Despite the two-day gain, the measure is still down almost 10 percent in December alone. “I’m on the golf course,” Innes says about how he’s responding. “As I have been most of the week.”

Read more: Tax Selling Done, Dip-Buying Back: On the Dow’s 871-Point Bounce

Mark Matthews, head of Asia research at Bank Julius Baer & Co. in Singapore, says two “golden rules” have been broken. First, since 1945, December has produced the highest average gains of any month, he says, but this month is set to be the worst of the year. Second, since the 1970s, the S&P 500 has never slumped when earnings growth was more than 10 percent, according to him. But as a long-only investor, Matthews is planning to ride it out. “I remain invested through good times and bad,” he says. “Not being invested, over the long term, is like betting against the house in a casino.”

a screen shot of a video game: 10-day volatility on S&P 500 Index has jumped to its highest since 2015© Bloomberg 10-day volatility on S&P 500 Index has jumped to its highest since 2015

Over in Sydney, Sean Fenton is scratching his head. “It’s certainly unusual for this time of year,” the portfolio manager at Tribeca Investment Partners says of the market moves. “You see people take holidays and sort of shutting up shop, not surges in volatility.” Fenton, like Matthews, says he’s hunkering down, betting that the U.S. economy is robust and the sell-off will bottom out. For this time of year, he’s “probably a little more focused on the market,” he says, but that doesn’t mean he’s got reasons for the moves. “Trying to explain short-term movements in the markets is an exercise in futility because generally it’s pretty random,” he says.

Related video: Markets Brace for 2019 Volatility


For some investors, elevated equity swings and sharp downward movements present a buying opportunity.

“The magnitude of the increase in volatility over the past week was not expected,” said William Davies, head of global equities at Columbia Threadneedle in London. “I don’t believe it’s easy to predict market movements over the short term but if we see attractive companies’ value decline as a result of the market sell-off, it makes sense to take advantage and add at the lower prices.”

Stocks in Europe opened higher on Friday, with the Stoxx Europe 600 Index rising as much as 1.7 percent. But the regional benchmark is still set for the worst year since the 2008 financial crisis, when it tumbled 46 percent.

Hold Cash

“We have never seen the U.S. market dropping at this magnitude and speed for the past eight to nine years,” says Margaret Yang, a market analyst at CMC Markets in Singapore. Yang’s solution is to go overweight cash for the time being. She expects the volatility to continue until year-end, until investors get a clearer picture from the holiday earnings season.

But longer-term, she doesn’t know if this will prove a “healthy correction” as investors find the S&P 500’s low valuations attractive and earnings come in above expectations, or if it will mark the end of the 10-year bull run. Either way, one thing’s for certain: “The recent movement is definitely unusual,” she says.

In South Korea, Lee Dong-jun agrees. The head of the global investment team at DB Asset Management in Seoul has also been staying as clear of the market as possible this week, tending only to existing investments and keeping away from new trades. “This isn’t normal,” he says of the market turbulence. “Investor sentiment is very bad.” And while “we don’t think this kind of huge volatility will persist,” he says, “our thinking is that it’s not a good idea to actively trade stocks in a market like this.”

--With assistance from Ksenia Galouchko and Eddie van der Walt.

To contact the reporters on this story: Abhishek Vishnoi in Singapore at;Min Jeong Lee in Tokyo at;Matthew Burgess in Sydney at

To contact the editors responsible for this story: Divya Balji at, Tom Redmond, Todd White

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