President Ignites an Unexpected Volatility Spike

February 19, 2025

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Hello, my Friends!

🤯 Today’s Impulse felt like a surprise attack on market volatility!

😴 We started the day on autopilot, lulled by a lack of major economic catalysts…

🚀 But in a heartbeat, the S&P 500 - drifting quietly since the futures open - was catapulted into the spotlight by a barrage of explosive presidential headlines!

This emphasizes the need for readiness in the face of such surprises.

President Trump emerged, suggesting a grand trade deal with China and significant Chinese investments in the U.S.

Here’s what broke the silence:

  • “Trump eyes a bigger and better trade deal with China.”

  • “Expressed interest in a deal that would include substantial investments and commitments from China to buy more American products.”

  • “Trump calls Ukraine’s President Zelenskiy a dictator without elections.”

  • “We are successfully negotiating an end to the Ukraine war.”

These bold statements ignited a wave of volatility, catching many traders off guard.

It’s a stark reminder that even when nothing seems to be on the economic calendar, external factors can still rattle the markets.

Essential Tips 📝

Even the savviest entrepreneurs can get blindsided by rapid market swings. Below are some key pitfalls that many new owners face - along with insights on how to address them.

Financial Exposure: 

  • Relying heavily on personal capital for both business and investments can create a dangerous ripple effect if markets suddenly turn.

  • Without proper hedging or diversification, rapid drawdowns can strike just when you need cash flow the most.

Overconfidence & Confirmation Bias:

  • Research in behavioral finance shows that many retail traders overestimate their skills and seek information that reinforces their existing views.

  • This tunnel vision can cause them to miss or dismiss red flags leading up to major volatility spikes.

Disposition Effect: 

  • When markets become turbulent, traders often hold onto losing positions too long and sell winning positions too early.

  • The sudden price swings can catch them on the wrong side of the trade, magnifying losses.

A disciplined approach - using risk levels, clear profit targets, and a balanced risk/reward framework - helps traders navigate surprises more successfully.

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Until next time,
Steve B
Founder, The Daily Impulse

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