The stock market has been volatile, since President Donald Trump announced sweeping tariffs on most of the world’s economies.
The S&P 500 plunged nearly 10% in just two days last week, briefly entering bear market territory on Monday. The Nasdaq composite and Dow Jones Industrial Average haven’t fared much better. But while many investors are running for cover, some see opportunity in the carnage.
As of Tuesday, markets were showing signs of life. The Dow rallied over 1,000 points and tech stocks bounced sharply hoping the U.S. could soften its trade posture. But with volatility still near historic highs and recession odds climbing, the question remains – is now a good time to start investing?
History Says Volatility Breeds Opportunity
While sharp market declines can rattle even seasoned investors, historical data suggests the volatility often presents long-term buying opportunities. According to Truist Financial, the S&P 500 has dropped into correction territory – defined as a 10% pullback – 56 times since 1950.
A year later, the index was higher 88% of the time.
“The probability for investors – at least history is with you,” said Keith Lerner, Chief Market Strategist at Truist. “But if history was all you needed, the richest people would be librarians.”
Lerner’s view is echoed by Morningstar’s Chief U.S. Strategist Dave Sekera, who recently told investors that U.S. stocks are trading at a 17% discount to fair value. "If you felt fine about your financial position last May, I think you should also still take some comfort," he said. The “markets selloffs just take us back down to where we were almost a year ago today."
Why Some Traders Are Turning To Futures
As retail investors debate whether to buy the dip, institutional investors are already deep in the trenches – using futures contracts to hedge against losses and speculate on market swings. Trading volume for futures across equities, commodities and Treasury bonds hit record levels in the first quarter of this year.
Futures allow investors to bet on the direction of asset prices with leverage. In April, many took short positions on S&P 500 and Nasdaq futures to offset losses in their portfolios while others speculated on sharp rebounds following tariff-related headlines.
What to Know Before Investing Now
Despite the bounce on Tuesday, volatility is expected to persist. The CBOE Volatility Index–Wall Street’s “fear gauge” – spiked to 60 on Monday, a level not seen since early 2020. And while the Federal Reserve may cut rates later this year, inflation remains elevated and economic growth forecasts have been slashed.
Morningstar now projects 2025 GDP growth at just 1.2%, down from 1.9%. Inflation is expected to average 3.3%, a full percentage point higher than previously forecast.
Still, Sekera believes long-term investors can start slowly wading back into the market.
“Don’t go all in,” he said. “I think you’re going to want a dollar-cost average into the market from here.”
Where Opportunities May Lie
Morningstar currently favors value stocks, which are trading at a 22% discount to their fair value. Small-cap stocks also appear cheap though they may remain under pressure until the economic outlook improves.
Some of Sekera’s top picks include Campbell’s Co (NASDAQ: CPB), trading at a 36% discount with a 4% dividend yield; Exxon Mobil Corp (NYSE: XOM), which offers inflation protection and strong cash flow; and International Flavors & Fragrances Inc (NYSE: IFF), a defensive play with deep moats and a nearly 40% discount.
Other experts suggest focusing on defensive sectors like healthcare and consumer staples or even gold, which rallied past $3,000 an ounce as investors sought safe-haven assets.
Bottom Line: The Risk Is Real – But So Is the Opportunity
The stock market is volatile and the macro backdrop is murky. But for investors with a long time horizon, today’s fear-driven environment could present rare entry points.
“Be greedy when others are fearful,” Warren Buffett famously said. That philosophy may never be easy to apply – but it often proves right.
About AJ Fabino
AJ Fabino is the Investing & Cryptocurrency Editor at Benzinga, overseeing a range of financial content, including stocks, ETFs, options, mutual funds, futures, IPOs, bonds, and cryptocurrency. With extensive experience in financial journalism and content strategy, AJ is dedicated to delivering engaging, insightful, and timely news that empowers readers to make informed investment decisions.
