One of the wildest runs in U.S. stock-market history began with the collapse of arcane gambles on volatility and ended with a sober realization: The easy ride is over. After heart-stopping sways in the Dow( Down 1,000 points! Up 500 points !), a market correction is ultimately here.
But why–and why now? Inflation, interest rates, valuations, computers, ETFs, Trump; plenty of reasons were offered up. Among the linger questions is the big one: Is this a hiccup or the start of something worse?
Monday, Feb. 5
8 a. m. EST, 11 Wall street, Lower Manhattan
Even before the opening bell, Monday looks like a bad day on the New York Stock Exchange. After the Dow Jones Industrial Average plunged a devilish 666 ahead of the weekend, the futures are pointing to trouble.
9: 30 a.m. EST, Lake Forest, Illinois
Thomas Forester has been here before: he shot to fame after his mutual fund turned a profit through the 2008 meltdown. Now, a decade later, he’s buying options–puts — to hedge against the risk that the stock market will tank again today. But even Forester is shocked by what comes next.” This week feels like a month already ,” he says later.
11 a. m. EST, Midtown Manhattan
It was the hot trade on Wall street. Now, newfangled investments linked to volatility in the stock market — until recently, obliterate niche products — are starting to explode. The Dow industrials begins to tumble: 200 phases, 300 phases, 400 points. Exchange-traded products( ETPs) and exchange-traded funds( ETFs) that are tied to volatility — in particular, the VIX index in Chicago — are sinking in a cascade of sell orders.