Don’t Fix Market Volatility; It’s A Feature, Not A Bug

There are decades where nothing happens; and there are weeks where decades happen. ― Vladimir Ilyich Lenin

Every time markets turn volatile, investors begin the familiar ritual of trying to time the bottom. The idea is seductive: wait for the chaos to pass, pounce when prices are seemingly the lowest, and hope that recovery begins. But that instinct—to search for stability amid instability—is not only futile. It’s dangerous.

There is no reliable bottom. Volatility isn’t a puzzle to be solved; it’s a condition to be managed. Investors who obsess over the exact turning point miss the deeper truth: that in uncertain times, success depends less on timing and more on temperament.

Why do people keep chasing the bottom? Because volatility triggers fear, and fear craves certainty. Investors anchor to past prices—“it was ₹800, so ₹500 must be a bargain”—or cling to expert predictions that often prove wrong. This is classic anchoring bias: using arbitrary reference points to justify decisions. But markets aren’t obliged to bounce back just because you bought in.

Even professionals fall for it. When IndusInd Bank recently disclosed a ₹15.2 billion treasury loss—unnoticed for seven years—it revealed not just a lapse in oversight by auditors and regulators but also a deeper overconfidence in institutions and forecasts. At the time, nearly half the analysts still had “buy” ratings on the stock. If seasoned experts can miss the cracks, retail investors shouldn’t assume they can call the turn.

Or, take the recent case of Goldman Sachs lowering their odds for a US recession in 2025 to 45%, within hours of raising it to 65% earlier in the day.

The fact is nobody can know anything when the world is facing, both, scattershot announcements and targeted ire from US President Donald Trump.

Kevin Khang, senior international economist at Vanguard, recently wrote, understanding the nature of volatility requires a longer view. “Historical context,” he says, “can be a powerful tool.” Market turbulence generally reflects one of three risks: episodic, economic cycle-driven, or existential, he said in a note.

In 2018 and again in August 2024, volatility flared briefly due to short-lived shocks—rate fears, unwinding carry trades—before quickly fading. Those are episodic. Far more dangerous are cycle-driven shocks, often triggered by fears of recession, like in 1980–82, 2001, or 2022. These tend to linger.

Uncertainty in markets is constant, it is low or high, never absent. The current volatility, Khang argues, is not episodic—and it’s certainly not existential like 2008 or March 2020. It’s cycle-driven, rooted in deep macroeconomic tensions: persistent inflation, global policy uncertainty, and what Vanguard describes as a “tug-of-war” between two megatrends—AI-driven productivity gains and the drag of rising structural deficits. With inflation still above the US Federal Reserve’s target and fiscal constraints mounting, monetary policy may not be able to ride to the rescue.

In other words, this isn’t over in days—it may last for months. Investors should plan accordingly, first by dropping the obsession with calling the bottom. 

President Trump’s abrupt decision to delay the implementation of his tariff hikes for 90 days might have sparked a historic rally and temporarily alleviated fears of an imminent recession. Despite the rally, market sentiment remains fragile. There could be another rally following the exemptions announced over the weekend for memory chips and other electronics, and as more details are made available about the exemptions.

At first glance, this might seem like good news for investors looking for stability. But dig deeper, and you’ll find that this bounce was more about oversold conditions than any fundamental shift in outlook. Citigroup even advised its wealthiest clients against chasing the rally, citing systemic uncertainty fuelled by Trump’s erratic trade policies.

Even with temporary reprieves—like delaying tariffs on electronics such as smartphones and laptops—the broader picture remains bleak. Existing tariffs are still in place, and new ones loom on the horizon. The message is clear: this isn’t over yet.

Ultimately, calling the bottom is not sine qua non for navigating volatile times. Investors who recognise there are times when, both, instinct and process don’t work are the ones who will batten down the hatches. They will let the storm pass, and look to stay afloat instead of seeking direction. The market’s future, like life, is always uncertain. That’s not a bug in the system—it’s the price of admission.