By Larry Benedict, editor, Trading With Larry Benedict
Investors are facing record-setting losses. They haven’t seen volatility like this in years.
President Trump announced a new round of tariffs that took the tariff rate to 29% (as a weighted average). That’s far above the rate following the Smoot-Hawley Act that fanned the flames of the Great Depression.
As a result, the stock market plunged immediately.
The S&P 500 lost $2.9 trillion in market value in a single day. The Dow Jones Industrial Average shed over 1,600 points in one trading session. The Nasdaq Composite posted its largest daily point loss ever. The Russell 2000’s index of small-cap stocks fell into a bear market with a 25% decline from the November peak.
No matter where you look, it’s a sea of red across the stock market.
But the warning signs for a surge in volatility have been building for a while.
Here’s what I wrote on January 2:
We all know about Trump’s proposed tariffs. But the market underestimates how big their impact might be. More expensive imports will send prices (and inflation) higher.
So I expect the U.S. economy to start strong in 2025. But it will weaken as the impacts of those tariffs start to bite.
And this is going to cause a lot of uncertainty. The market is priced for perfection right now. So this uncertainty will challenge stocks’ lofty valuations.
Making money in the stock market isn’t supposed to be easy, like it has been in recent years. Complacency helped set the stage for what you’re seeing now. Tariffs just happened to be the catalyst.
If you’ve been caught on the wrong side of the market action, it’s time to rethink your trading strategy.
So today, let’s explore this new era of volatility… and how you can turn market uncertainty into profit opportunities.
Too Much Complacency
President Trump’s “Liberation Day” left nothing but stock market wreckage and questions about the economy in its wake.
Many analysts were quick to blame tariffs and trade wars for the sudden sell-off – and they’re not wrong. But the conditions for a spike in volatility have been building.
Complacency has been building for years on the back of mega-cap stocks. The “Magnificent 7” helped drive profits for investors. During the S&P 500’s 20%+ moves in 2023 and 2024, the Mag 7 was responsible for over half of the gains in each year.
It was the first time in nearly 30 years that the S&P delivered consecutive 20%+ annual gains. That’s not normal behavior.
The Invesco QQQ Trust, Series 1 (QQQ) – which tracks the Nasdaq-100 – hadn’t dropped below the 200-day moving average in 497 trading days. That’s the second-longest streak in history.
Again, this is not normal market behavior. Stocks are supposed to be a volatile asset class. An extended period of calm nearly always gives way to a boost in volatility in the end.
Sharp price swings in the stock market are nothing new. So it’s time to realign your expectations. The period of calm that many grew accustomed to is behind us now.
And if the market environment is changing, you must evolve with it.
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A Different Playbook
Buying the dip worked reliably for the last couple of years. That’s no longer the case.
Now, you need to be flexible and deploy sound risk management strategies.
Flexibility means keeping your number of positions manageable. Because when you see profits, you need to snag them. And you need to exit positions moving against you just as fast.
When markets are roiling this dramatically, you’ve got to be quick on the draw. You also have to stay nimble enough to profit from relief rallies as well as the pullbacks. Don’t get locked into any one mindset.
Risk management means knowing how much you stand to lose on any position. Plus, you need to know where you would exit a trade working against you.
As I often remind you, never risk too much of your capital on a single trade. That’s how you stay in the game during sharp declines.
I know because I’ve traded through many chaotic stretches over my 40-plus-year career. I was on the trading floor during the 1987 crash. I traded through the aftermath of the Internet bubble and when Lehman Brothers collapsed in 2008.
I also know how to come out ahead through these uncertain times.
Subscribers in my One Ticker Trader advisory have closed 15 trades this year, with 14 of those showing a profit. Our average gain this year is 28.9%.
And subscribers across all my services have been locking in gains despite the choppiness over the past month.
I’ve been warning for quite some time that a surge in volatility was coming. Now it’s here.
My goal is to help you thrive while protecting your capital. I’ll be demonstrating how you can continue to profit in these kinds of crazy moments in the coming days. Stay tuned…
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
P.S. While tariffs dominate the headlines, our colleague Jeff Brown has found an opportunity that he believes transcends today’s volatility.
If your portfolio is suffering, consider checking out Jeff’s new opportunity. He believes it could help you profit despite the chaos. That’s because he’s been tracking this story for a while, and he says now is the time to strike.
In 2011, Jeff rode in an early self-driving car… In 2018, he recommended Tesla… And last year, he blindfolded himself in a Cybertruck to show that Tesla’s self-driving technology was ready for prime time.
Now he says the day has come. As early as June 1, Tesla could launch its fleet of self-driving robotaxis. And Jeff believes that, for a limited time, you have a shot to get in on some small companies set to soar.
If you’re interested in learning more, then be sure to tune in on April 10 at 1 p.m. ET. That’s when Jeff will share the details in The Robotaxi Emergency Briefing – including the name of one of his top picks.