Last night was an especially volatile session on US markets.
ASX investors who woke up this morning to see the S&P 500 Index (SP: .INX) down just 0.2% may have assumed it was a quiet trading session. They'd be mistaken. Those who followed it in real time would have quickly reassured them it was anything but a quiet session.
The S&P 500, which tracks America's 500 largest companies, saw sharp losses become sharp gains in a matter of hours. This marked some of the biggest swings since the height of the COVID-19 pandemic in 2020.
The market opened lower, but it soon reversed course based on a report that President Trump was considering a 90-day pause on all tariffs except China.
This sent many stocks surging. For example, Nvidia initially opened materially lower and traded at a share price of $87.56 before gaining nearly 14% to reach $99.51 in the space of a few hours. Similarly, Amazon opened lower at $161.98 before charging almost 11% higher to $179.27 in a similar timeframe.
The White House then appeared to confirm that a 90-day pause was not on the table, causing stocks to trend back down.
Volatility in recent days appears to be stemming from mixed signals. US Treasury Secretary Scott Bessent has revealed he's negotiating with Japan and plans to discuss potential tariff deals with other nations. However, US Commerce Secretary Howard Lutnick maintains that tariffs will be permanent and not up for negotiation.
How should investors respond?
Image source: Getty Images
Stick to your investing plan
Witnessing such dramatic swings in your portfolio holdings throughout the day can be stressful. Especially when it's based on speculation that is later confirmed to be untrue.
While the ASX is typically far less volatile than US markets, extreme intraday share price movements can happen here, too.
ASX investors should prepare for this and refine their investing game plan. This includes having a ready-made watchlist and deciding on the price they'd like to pay for those companies. That way, investors can be ready to pounce on any opportunities that present themselves.
Utilising limit orders
For investors, buying their favourite shares at desired prices doesn't mean sitting in front of the screen all day tracking the market. Instead, investors can set a limit order and let it do the work for them. Limit orders allow investors to specify the price they want to pay, how many shares to purchase, and when they would like the offer to expire.
This allows investors to decide on the price they want to pay for their favourite ASX stocks ahead of time. That way, they can go about their day and lock in those share prices if they get there anytime before their limit order expires.
Foolish Takeaway
Every investor's dream is to buy attractive companies at great prices.
However, the market is dynamic, and valuations are always changing. In an expensive market, companies trading at their historical price-to-earnings (P/E) ratio become cheap. When the overall market is no longer as expensive, average PE multiples may appear expensive. Therefore, it's important that investors update their watchlists and price targets regularly to ensure they are not passing up even better opportunities.
