Investors have reasons to be nervous about markets right now. How to separate the warning signs from the noise.
Throughout all the market choppiness, stocks pushed higher this past week
Last Updated: Oct. 19, 2025 at 8:47 p.m. ET
First Published: Oct. 19, 2025 at 10:00 a.m. ET
Investing means learning how to separate the signal from the noise. Photo: MarketWatch photo illustration/iStockphoto
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The federal government has been shut down since the start of the month, and prediction markets are saying it could become the longest shutdown in U.S. history. The Fed’s “beige book” reported that the economy has slowed down over the past two months. Last week, President Donald Trump decided to use Truth Social to fire off new tariff threats against China. And, just last week, investors got spooked by signs that banks’ recent credit losses might not be isolated incidents.
It seems as if investors have been getting hit with one market-moving risk after another — and markets have certainly moved. The Cboe Volatility Index
VIX-6.64% closed at its highest level since April on Thursday, as U.S. stock indexes reversed between gains and losses over several choppy days of trading. (The VIX fell back nearly 18% a day later.)
With all this going on, it may be easy to forget that we just marked the third anniversary of this current bull market, and the S&P 500
is only off 1.2% from its all-time record high
Investors who let April’s tariff drama scare them away from the stock market missed out on the 35% growth of the S&P 500 over the following six months. For those investors, that may be a hard pill to swallow.
“The impressive recovery, despite all [the] trade headlines and other risks, underscores the importance of trading with the trend,” Fawad Razaqzada, a market analyst for StoneX, wrote in a Thursday note.
He pointed out that the sharp selloff on Friday, Oct. 10, after Trump’s tariff threats against China, was followed by notable gains on Monday. So long-term investors were able to recover some of the losses, while short sellers had limited time to react to the selloff. Throughout the week, investors saw more quick reversals from gains to losses and back to gains, making it particularly difficult to time the market.
“Granted, when the trend does eventually turn, the sellers will have lots of opportunities, but, as I keep banging on about it, the trend is your friend,” Razaqzada said.
For long-term investors, it may be better to keep a level head through the market’s ups and downs. And for those who decided to walk away from the market and are now looking for an opportune time to get back in, sitting on the sidelines often means falling further behind.
“It’s about trying to maximize upside capture in bull markets, while also minimizing downside capture in bear markets,” Darius Dale, chief executive of 42 Macro, told MarketWatch. “We very much coach people not to overreact to short-term noise.”
What the market is telling us right now
Fourth-quarter earning season ramped up this past week, with many major financial institutions reporting their quarterly results.
Earnings calls are closely watched by savvy investors, but that has perhaps been more true than usual this time, as investors try to get clues about the economy with official data sources on pause during the government shutdown. Earnings season is also often correlated with higher levels of single-stock volatility, as investors react to the updates that companies provide.
Perhaps that explains the strong market reaction to what JPMorgan Chase & Co.
CEO Jamie Dimon called “cockroaches” in the private-credit space. This led to a financial-sector selloff on Thursday after Zions Bancorp
revealed a $50 million loan loss.
“Concerns over the private-credit market have been circling in the background for a while now. If (repeat, IF) they become more prevalent going forward, it will definitely create headwinds for the markets,” Matthew Maley, chief market strategist at Miller Tabak, wrote in a newsletter.
Outside of financials, Maley said it will be important to watch earnings from the major Big Tech names. With valuations for many of these stocks trading so high, the bar for their earnings will be much higher. If those results don’t meet such high expectations, we could see similar single-stock or sector-related selloffs.
Maley also pointed to VIX levels as an indicator of what investors are doing. “In other words, even though there was not a lot of selling going on outside of the bank stocks, fear had become strong enough that investors did buy a decent amount of protection yesterday,” Maley said. That entailed buying put option contracts against the S&P 500 as a hedge against market declines.
Read: Wall Street’s ‘fear gauge’ surges to highest level since May. Here’s what investors should know.
Investors may be hedging against market declines because they haven’t seen a significant one in a while. Even with the Oct. 10 selloff, the S&P 500 still hasn’t seen a 3% pullback since April — and 3% pullbacks, historically, aren’t exactly uncommon.
It could be that the selloff simply reminded investors that sizable market drops do happen from time to time, and perhaps we’re overdue for one.
“Friday reminded people that risk is out there,” Steve Sosnick, chief strategist at Interactive Brokers, told MarketWatch of that Oct. 10 market event.
Sosnick referred to the selloff as letting some steam out of an overheated system — something that’s important for healthy markets to do.
What investors can do
Sosnick said that if the choppy market scared investors, it might be time for them to re-evaluate how they approach their portfolios. “Use Friday [Oct. 10] as a gut check, and I say this after every decline — if you were rattled by it, it means you carry too much risk,” Sosnick told MarketWatch.
He noted that investors could reposition their portfolios to incorporate more defensive sectors or dividend stocks, if they want to manage risks.
However, other investors haven’t let the headlines change their investing thesis.
“While the latest U.S.-China trade flare-up has dominated recent market headlines, the story remains the same for stock investors — the importance of focusing on large-cap, quality companies,” Daniel Skelly, head of Morgan Stanley’s wealth-management market research and strategy team, wrote in a note.
Dale — whose company, 42 Macro, provides retail investors with research to help them manage their risk — said that one of the best things an investor can do for themselves is come up with a set of investing rules to follow throughout all market conditions.
“The most important thing you can do as an investor is to add guardrails around your decision-making process, such that you evaluate every decision you make with an ex ante outcome in mind — if ‘x’ happens, I will do ‘y,’ ” Dale said.
That way, when markets are choppy or a selloff happens, investors are prepared.
“It’s not just about riding out drawdowns,” Dale added. “The best investors in the world all operate with very clean-cut, black-and-white rules with respect to managing risk.”
The Dow Jones Industrial Average
ended the week about 1.6% higher. Meanwhile the S&P 500 gained 1.7%, and the Nasdaq Composite
added 2.1% this past week.
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