Navigating the current volatility in the stock market

Global equity markets have witnessed a whirlwind of activity over the past few days, characterised by sharp declines and extreme volatility. In many ways, this wave of turbulence appears to be a self-inflicted move by the U.S. administration, and that it will also impact U.S. consumers. At Calamatta Cuschieri we believe the pressure on the U.S. administration will intensify, prompting a more rational approach to this trade war through constructive dialogue. Here are our latest observations:

Extreme Volatility & the VIX Spike

One of the clearest indicators of market anxiety is the CBOE Volatility Index (VIX), which recently spiked to levels seen last in the COVID19 crisis. While volatility of this magnitude was understandable at the height of pandemic-related uncertainties, the current scenario arguably does not justify such extreme fear. A VIX reading near 60 strongly suggests panic selling is taking place, often driven by emotion rather than fundamentals.

Avoiding Rash Decisions

During periods of heightened volatility, it is tempting for investors to exit the market prematurely. However, given the current climate and the nature of the sell-off, we know that closing positions at these levels could be irrational. Although it’s easy to be swayed by negative headlines, remember that the VIX often reflects fear rather than a permanent shift in market fundamentals.

Political Pressure & the ‘Wealth Effect’

The U.S. administration is under growing scrutiny to take a more measured stance and potentially resolve the notable market turbulence. Tariffs are not only impacting the ‘wealth effect’ due to significant market volatility but will also inevitably impact consumer confidence due to the expected higher inflation. Moreover, political implications might be also a concern for Trump’s administration with mid-term elections on the horizon, neither party can afford to ignore the financial and psychological toll that persistent volatility inflicts on voters.

Deploying Cash Selectively

At Calamatta Cuschieri, we are closely monitoring evolving market conditions and do not rule out deploying available cash in the near term. Several high-quality companies

with strong fundamentals have seen their market capitalisations shaved off at a pace that appears disproportionate to any underlying challenges in their business models. While some valuations, particularly in more speculative segments have been stretched, and therefore took a harder hit, they could also rebound vigorously if a relief rally materialises.

The Importance of Staying Invested

Historically, the best way to benefit from recovery phases has been to remain invested, rather than attempting to time each market swing. It’s crucial to remember that it is the time in the market, not trying to time the market, that ultimately contributes to long-term returns. Missing just a few days of a strong market rebound can dramatically reduce overall performance.

The current market showcases both the unpredictability of global events and the emotional responses they trigger. While the fallout initially affects U.S. consumers and businesses, the rumbling can be felt worldwide. We anticipate that rational policy measures and the natural market mechanisms will help stabilise conditions in due course. Until then, we encourage investors to maintain a disciplined strategy, avoid hasty decisions, and remain focused on the broader horizon.

Calamatta Cuschieri will continue to actively assess market developments and maintain open communication with our clients. If you have any questions or concerns about your portfolio, please reach out to our team of financial advisors.

This information document is issued by Calamatta Cuschieri Investment Services Ltd (“CCIS”) of Ewropa Business Centre, Triq Dun Karm, Birkirkara, BKR9034, Malta (C13729). CCIS is licensed to conduct Investment Services under the Investment Services Act in Malta by the Malta Financial Services Authority.

This information is being provided solely for educational and informational purposes and should not be deemed or construed as investment advice, advice concerning particular investments, advice concerning investment decisions, tax, legal, or any other ancillary regulatory advice. The information presented does not take into account your personal circumstances and is provided to You on the express basis that it is not advice, and you may not rely upon it in making any investment decision. Investments in any financial instruments involve risks, you should make your own research before making any investment decisions and should seek the assistance of a financial advisor if in doubt. No person should act upon any opinion and/or information in this document without first obtaining professional advice. CCIS does not accept liability for actions, proceedings, costs, demands, expenses, damages, and losses suffered by persons as a result of information, views, or opinions appearing on this document.