Investors are becoming increasingly anxious about all types of economic data, including routine reports that were once easy to overlook. As the Federal Reserve works to reduce rates and achieve a soft landing for the economy, market reactions have intensified.
While key reports like monthly job figures still attract attention, even less significant data releases are now causing noticeable market fluctuations. According to Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions, investors have grown “hyper sensitive” to the rapid flow of news and can react instantly, often with extreme market moves.
Bespoke Investment Group analyzed 25 years of data and found a notable increase in Wall Street volatility, particularly in the four years following the pandemic. Before the pandemic, the S&P 500 index saw an average daily move of 0.81% on days with economic data releases. Post-pandemic, this increased to 0.94%.
Their study of 34 types of economic indicators revealed that previously less significant data has gained market attention. For example, the University of Michigan’s consumer confidence survey, ADP payroll data, and durable-goods orders have all triggered market moves of at least 1%. Prior to the pandemic, such dramatic reactions were rare.
Jeffrey Roach, chief economist at LPL Financial, highlighted the Labor Department’s JOLTS report as a prime example of a once-overlooked dataset that has gained significance during the current economic tightening. As the Fed focuses on labor tightness, particularly the openings-to-unemployed ratio, the report has become closely scrutinized.
Inflation data and “Fed-decision days” have also become major market movers. The average daily market move on Fed-decision days was 0.88% before COVID-19, but it surged to 1.17% after March 2020. Janasiewicz pointed to increased leverage and options trading as possible catalysts for these swings.
Although inflation concerns persist and fears of recession linger, markets have remained resilient, with the S&P 500 and Dow Jones both climbing recently on strong economic data. However, Janasiewicz warns that investors remain on edge, ready to sell at any sign of economic weakness, driven by the fear of being the last to exit the market.
