Will The Stock Market Volatility Continue?

After a year of constantly digesting positive events (Fed backstopping everything, CARES Act, electoral clarity, second stimulus, third stimulus, vaccination progress) the markets are transitioning to a new paradigm where (1) There isn’t a majorly positive event looming every three months, and (2) Some of the stimulus etc. will be dialed back, and that transition will be a process of starts and stops, and it likely will cause more volatility, which we saw that last week.

 General inflation fears are a headwind on stocks, and they will be until it becomes clear that inflation is a temporary phenomenon. Similarly, the Fed will have to transition to tapering of QE, and how that transition is handled will go a long way to deciding whether the next 300 points in the S&P 500 are up, or down. Finally, after having that aforementioned constant stream of “good” news to push stocks higher, we’re seeing a market that is in search of a positive catalyst to send the S&P 500 to 4400-4500, and right now there’s not an easily identifiable candidate.