2025 has started off with noticeably volatile weeks in the stock markets. This volatility stems from various economic and political factors we currently face. On top of this, we live in an age of news and social media that can sometimes feel overwhelming. Each week, a new headline turns heads and makes people react emotionally. News companies aim to constantly keep you engaged and capture your attention. Amid this bombardment of information, the markets are also affected—a fact reflected in their volatility. The CBOE Volatility Index (VIX), commonly known as a “fear gauge,” measures market expectations of near-term price fluctuations. We have already seen this index spike to higher-than-normal values following China’s DeepSeek AI news and concerns over U.S. trade policies regarding tariffs with Canada, Mexico, and China. Let’s now examine some aspects that cause market sentiment to change as quickly as it did a decade ago.
Information travels faster than ever before. This fact is apparent not only in social media and the news but also among investors who can check their balances on their phones in real time. In stark contrast to receiving quarterly or monthly statements, some investors check their balances multiple times throughout the day. Companies like Charles Schwab, Vanguard, and Fidelity offer apps that send notifications and alerts, keeping investors constantly engaged. These alerts trigger emotional responses that prompt us to react to the news we receive. Because information moves so quickly, market sentiment and trends shift over much shorter time periods. This rapid pace leads to higher volatility as investors decide whether to buy or sell, sometimes even changing their minds daily based on recent news. Whether it is the news media or smartphone apps, the goal remains to keep you engaged at all times and returning the next day for more.
Society has become more impatient, ignited by the constant demand for instant gratification and rapid technological advancements. We see this trend reflected in the markets as well. Options trading volume and leveraged ETF inflows reached record highs in January 2025, according to data from CBOE Global Markets. These financial products lead to greater volatility because of the risk they carry. Both retail and institutional investors have used these instruments, with overall demand increasing in January as noted by an article published by MarketWatch. When you use leverage, it not only accentuates your gains but also your losses—a 5% drop in the S&P 500 index can correspond to a 10% drop in some leveraged instruments. This dynamic leads to higher market volatility and suggests that many investors lack the patience to wait for long-term growth and success. Compelled by the prospect of being the next “millionaire overnight” story, many turn to high-risk options contracts and leveraged products that are essentially equivalent to lottery tickets when purchased.
Technology is constantly changing and evolving, and as a result, social media and news are becoming increasingly integrated into our everyday lives. Sometimes, as an investor, the best—and often the most difficult—course of action is to do nothing. It is important to understand that, in the short run, stock prices are influenced by emotions and trends, while over time, great and successful companies reveal their true value. To quote a famous adage from Warren Buffet, “In the short-term, the stock market is a voting machine, but in the long-term it is a weighing machine.
