The stock market often appears to know things before the rest of us find out. I wonder about that sometimes...
If you've spent any time listening to our morning show over the past few years, you've probably noticed I pay a lot of attention to the financial markets. Part of this is shameless self-interest (gee, I wonder what my 401k will look like tomorrow), but I've also learned the stock market often gives you a heads-up on things well before the news media does. I sometimes wonder how and where stock traders are so plugged in -- George Noory, there might be a conspiracy here! -- but I see it pretty often, and here's an example:
Even though Wall Street rings the closing bell at 4 pm, there is a lot of US-based "after-hours" trading activity continuing into the evening. Monday evening, I was watching the prices move on two securities: one tied to the value of the Dow 30 index, the other tied to the value of the "VIX," the volatility index, sometimes called the "fear gauge." Without getting too technical, these two things typically move in opposite directions: when stocks are on a solid upswing, the VIX goes down, because people are comfortable with stocks moving up; when stocks look shaky or start dropping, the VIX goes up, because traders get nervous or scared about the stock market going down. So, with that in mind...
I was watching my computer screen and, within a matter of seconds, the VIX shares went off like a rocket, while the Dow shares looked like they were going over the cliff. My wife was watching the news downstairs, so I yelled:
"What just happened??!!"
Karen was perplexed. "What are you TALKING about?"
"THE AFTER-HOURS MARKET IS TANKING, AND THE VOLATILITY INDEX WENT OFF LIKE A MOON SHOT! SOMETHING JUST HAPPENED! DID KIM JONG-UN LAUNCH A MISSLE AT US??!!"
"I just looked at Bloomberg, CNBC, and CNN. Nothing."
"THAT'S NOT POSSIBLE!"
A few clicks of the mouse later, I found out that President Trump just announced he was looking to hammer China with tariffs on more than $200 billion of Chinese-made goods coming into the country... but it took several minutes for the word to get out. The big Wall Street traders knew within seconds.
Hmmm... very interesting.
(PS: The markets didn't like Mr. Trump's decision at all; the Dow ended Tuesday down 287 points.)