By Teresa Rivas

Another week, another roller coaster ride. OK, fact: The jitters aren't going away. So, do you jump in or stand by and watch?

The major indexes all started Monday off by more than 1%. No economic headlines, no major earnings, just more tariff obsession.

"These are definitely not normal times, and while a day trader's dream, it really is an investor's nightmare," writes Rosenberg Research's Dave Rosenberg.

"The volatility across all markets these past two weeks rivals what we endured in the 2008 Great Financial Crisis and the 2020 pandemic recession."

Yet more worrying, he notes, is that Wall Street isn't out of the woods yet.

The huge number of potential outcomes to the Trump trade war translates to an equally huge number of potential impacts on corporate earnings.

That is so clearly obvious from the wide range of estimates that strategist have been putting out there. The S&P 500, for example, could end the year anywhere from 4,000 to 6,000, on earnings per-share declines of 5% to 35%.

Just try to fully grasp those spreads.

Rosenberg warns that "as recession risks are high and rising, the S&P 500 has at this time only priced itself in for about 30% of the way toward such an outcome -- one that inevitably crushes corporate earnings and sharply compresses the market multiple."

With so many variables, analysts have dragged their feet to adjust their estimates yet, particularly since the tariff numbers and players can change every day.

The upshot, though, is this: The average S&P 500 EPS estimate for the full year has fallen, from $272 at the end of last year to $265 -- and very well may have further to go. Some argue that 2025 year is a write-off and the focus should be on 2026 earnings.

So, the only guarantee is ongoing volatility, a fact that even relatively bullish voices have accepted.

"The ongoing turbulence with tariffs continues to rattle investors, setting up a volatile equity market for some backing and filling while our breadth indicators take time to improve from deep oversold levels," writes Craig Johnson, Piper Sandler's chief market technician.

Whether you call it turbulence or volatility or jitters, investors are forced to decide whether to make hay of the big swings -- buying when fear is near its highest because it's a dip or staying on the sidelines because it's a prelude of what's to come.

With Wall Street's fear gauge, the Cboe Volatility Index, or VIX, notching a close of 52.3 earlier this month -- a 4-standard deviation from the norm -- and still north of 30, it's a timely question.

Modest shocks, which see the VIX toggle between 27.3 and 43, happen fairly often, in the market, accounting for 11% of days since 1990, according to Nicolas Colas, co-founder of DataTrek.

By contrast, the big jolts -- when the VIX is above 43, are only about 2% of the time, and tend to presage more trouble ahead.

"There's never been a period of market instability with just a single +4 standard deviation close," Colas writes.

The financial cris, in 2008-09, had 50 of those days, and there were 18 in 2020, the first year of the pandemic.

Colas contends that if investors disregard the VIX spike as "a statistical aberration rather than signal," history shows that large-caps will rally.

"If we stick religiously to the data," he writes "it is entirely rational to expect a difficult next 3 months before markets start to perk up later in 2025 and into 2026."

Colas is clear where he stands: "It is very hard to get bearish here."

Of course, as Colas points out, today is different from the financial crisis or the Covid-induced recession. One person is responsible for the uncertainty: President Donald Trump.

"Now, market volatility is the result of one narrow set of policies crafted by essentially one individual," he writes. "As long as US trade policy does not pivot back to the extremes of 'Liberation Day,' the VIX should not revisit the +4-standard deviation level unless we get a 'new new' shock to the system."

Maybe the market is over being so surprised by trade policy. But aftershocks can come days, even weeks, after an earthquake.

If this year has taught us anything, it's never say never.

Write to Teresa Rivas at teresa.rivas@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 21, 2025 11:41 ET (15:41 GMT)

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