Volatility: The adrenaline rush that tightens in our stomach.

December 2025 by Ana Carrisso

If it were possible to define the year 2025 with a single word, it would probably be: volatile. Throughout the year, markets have experienced numerous surprises, most of them negative: Back in January, an AI originating from China called Deepseek caused a collapse in major American tech companies associated with this trend, such as Microsoft and NVIDIA. The latter plunged 17% on the stock market (the biggest single-day drop in Wall Street history), losing $600 billion in that session.

In April, Donald Trump announced a much tougher trade policy than anyone had anticipated, not even his trading partners, and all stock markets fell simultaneously, having erred on the side of excessive optimism. US Treasury bonds also fell sharply, a notable fact given that this benchmark does not usually register such aggressive fluctuations, which are more typical of stock markets. Furthermore, the dollar plummeted, registering its worst start to the year since 1973.

Successive negotiations brought new peaks of volatility throughout the summer, and yet, stock markets managed to recover about 30% from their lowest point, in the case of the US, whose main stock market index, the S&P 500, once again reached historical highs.

In recent days, we have also begun to observe sharp increases in volatility in other markets, most notably silver, at prices not seen since 1980, and cryptocurrencies such as bitcoin and ethereum. The reasons behind this frantic behavior, which are still being analyzed at the time of writing, range from increased geopolitical risk to growing distrust regarding the direction of the global economy, which is driving investors towards safe-haven assets (with gold being the quintessential safe-haven asset), but also as a reaction to the US Federal Reserve's monetary policy of lowering interest rates.

Volatility: It's like riding a roller coaster.

Those who have been in the markets for a long time often use the image of a roller coaster as an analogy for the behavior of volatility. It's true that markets are sometimes up and sometimes down; Volatility arises when there are abrupt rises and falls in a short period of time, generating in investors that stomach-churning feeling we get when we go up on one of those rides.

Now, if we wanted to be scientific, how could we define volatility? In financial mathematics, volatility is a statistical measure that describes the frequency and intensity of price changes experienced by a financial asset, market, fund, index, or other variables such as exchange rates or interest rates. The most important thing to know about volatility is that it is considered an indicator of the risk associated with an instrument. The greater the volatility, the greater the uncertainty surrounding that asset and, consequently, the greater the risk.

One of the most popular indicators for measuring these price fluctuations, in this case on the stock market, is the VIX index. It is also known as the "fear index," and with good reason: Its three biggest peaks this century occurred in 2009 (global financial crisis), in 2020 (Covid pandemic) and last April, during the so-called Liberation Day, when Trump presented his tariff strategy.

Having reached this point, the reader may conclude that volatility is, in fact, a bad thing. But it doesn't have to be. It's true that markets don't like uncertainty. When surprises occur, adrenaline kicks in, that feeling that makes our stomach churn. However, it is also true that volatility creates opportunities: For example, it can unfairly penalize companies with solid business models simply for being in the wrong place at the wrong time. As proactive managers, our task is to identify these opportunities and seize them for the benefit of our clients.