Volatility as Opportunity: Market Dislocations in the Wake of Economic Disruptions

Market volatility is often viewed as a risk to be mitigated, but for discerning investors, it can also present meaningful opportunities. Typically, we see periods of elevated volatility (as measured by the CBOE Volatility Index – VIX) during times of uncertainty or rapid changes in sentiment, policy, or economic fundamentals. These shifts can create market dislocations — where prices diverge sharply from intrinsic values — offering investors selective entry points for long-term positioning. The recent market reaction to the re-imposition of Trump-era tariffs in early 2025 provides a timely example.

In April 2025, the Trump administration reintroduced a new round of tariffs targeting goods from China and the European Union, citing the need to protect domestic industries. The market response was swift and sharp: equities sold off, U.S. Treasury yields rose as inflation fears re-emerged, and implied volatility spiked across asset classes. While the announcement generated headlines, the deeper story was told through asset repricing. Investors quickly reassessed growth expectations and supply chain costs, leading to dislocations in sectors such as industrials, consumer discretionary, and global trade-sensitive technology stocks.

However, by early May, the administration temporarily paused the tariffs for 90 days in response to growing financial market stress in both equities and fixed-income markets. This reversal demonstrated a key principle: volatility rooted in policy uncertainty often unwinds just as rapidly as it emerges, creating opportunities for those positioned with discipline and foresight. Investors who followed their plans, remained engaged, and/or selectively added exposure during the pullback stood to benefit from the subsequent relief rally.  As of this writing, we have witnessed two periods within the past two months that provided the types of market reactions to the upside that can lead to financial stress if missed.

More broadly, market dislocations tied to volatility offer opportunities in several forms:

• Mispriced quality assets: High-quality companies may get caught in broad selloffs, creating attractive entry points.
• Relative value trades: Sector dispersion increases, allowing for rotation into oversold areas.
• Fixed income advantage: Rising yields during volatility can offer better entry points into duration or credit risk.  This is another reason why we maintain a slightly elevated cash position for both fixed-income and equity entries and/or adds.

As you may remember, part of the plan development stage is to help you, the client, separate the noise (aka, dirty water) from potential opportunities while focusing on your future financial objectives.  It is also important to recognize that the cyclical nature of market uncertainty often reinforces confidence and the rationale for maintaining a longer-term focus on your investments.

In closing, while market volatility like that seen during the recent Trump tariff episode can initially rattle investors, it also creates windows of opportunity. With a disciplined approach, selective risk-taking during these periods can enhance long-term returns and provide additional confidence in the plan that you developed early on with your advisor. Your Financial Peace of Mind is our top priority, and we are here to help you navigate the market volatility while potentially taking advantage of opportunities that may arise due to dislocations in valuations.  If you do have any questions concerning your plan and your risk tolerance, please reach out to your advisor to discuss further. We hope that you are having a wonderful spring and looking forward to seeing you again soon.