The CBOE Vix Volatility Index was up more than 12% Tuesday morning as stocks opened lower on Wall Street.
In the first few minutes of trade, the S&P 500 index was down 0.8%, while the NASDAQ, which has been the best-performing of the major U.S. indices over 2023, lost 1.6%.
After a strong build-up in risk sentiment during the last two months of 2023, 2024’s first trading session appeared to unwind the market confidence that drove U.S. indices to within a whisker of their 2022 record highs.
The SPDR S&P 500 ETF (NYSE:SPY), an exchange-traded fund that tracks the senior index, fell 0.7%, while the Invesco QQQ Trust ETF (NYSE:QQQ) which tracks companies on the NASDAQ 100, was down 1.4%.
The Kobeissi Letter, posted on X on Tuesday morning, said: “Euphoria seen in the final weeks of 2024 was historic. The S&P 500 tripled its gain seen in the first 10 months of 2023 in the final two months.
“Now, profit takers are out early this week as a bumpy road is ahead of us.”
Also Read: Why Buy Stocks In A Presidential Election Year? History Has A Crazy Stat For You
Middle East Tensions & Stocks
Among those bumps in the road, tensions in the Middle East have increased as the war between Israel and Hamas continues.
On Tuesday, oil prices were up by around 2% in early trade as Iran, which has been sponsoring Houthi rebel attacks on shipping in the Red Sea, sent a warship of its own into the region. The United States Oil Fund (NYSE:USO) an ETF that tracks the price of U.S. light-sweet crude, was up 0.7%.
The dollar, meanwhile, as a proxy of lower risk sentiment, was having its best day in two months. The dollar index, which tracks the currency’s performance against a basket of its rivals, was up 0.74%, while the Invesco US Dollar Index Bullish Fund (NYSE:UUP) an ETF that tracks bullish bets on the dollar, gained 0.7%.
Adding to market pressures in the coming year will be national elections, with polls in the U.S., U.K., Taiwan and India, among others.
Historical data shows that election years in the U.S. generally return positive results for equity markets; how much depends on how they affect current areas of geopolitical risk.
“Geopolitical tensions were already some of the biggest investing risks going into the new year, and many of the coming results will determine how those pressures will…
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