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The S&P 500 (^GSPC) surged 2.3% on Thursday, marking the biggest daily gain for the index so far in 2024.

Just three days earlier, the S&P 500 registered its biggest single-day loss of 2024.

Volatility has been on the rise in markets since mid-July, with the CBOE's Volatility Index (^VIX) spiking sharply from the teens to over 65 at one point on Monday.

But as our Chart of the Week shows, volatility coming to the markets is less about the direction of the market and more about the size of the moves.

As DataTrek’s Nicholas Colas wrote this week, high levels of volatility usually do mean a hit to one- to three-month returns. Meaning that volatility’s general association with “down” isn’t altogether misguided.

But while the market is never very predictable in the short term, it’s especially unpredictable when things are more volatile. As Colas quipped, who would have thought it would be initial jobless claims, of all things, that delivered the year’s biggest day?

And that the best and worst days have come so close on the calendar speaks to the advice Interactive Brokers' chief strategist Steve Sosnick told Julie Hyman in her column earlier this week — investors should strongly consider doing nothing.

The lesson that big gains and big losses can go hand in hand may be hard to internalize, but it pops up everywhere. And after this week it’s hard not to think about the 2024 forecast update in May from BMO chief investment strategist Brian Belski.

As he called one of the biggest shots on Wall Street at the time — a 5,600 year-end price target for the S&P 500 — the inexorably bullish note flagged the likelihood of a big drawdown in the coming months, simply based on the fact that in most bull markets, the second year has an average pullback of 9.4%.

And with Monday’s rout charting a course 8.5% off the recent high, Belski’s call seems to have materialized. The first part, anyway.

But you can’t have one without the other. Colas pointed out the old saw that “volatility is the price you pay for equity market returns.”

Or said another way, stomaching the volatility is what the money's for.

Ethan Wolff-Mann is a Senior Editor at Yahoo Finance, running newsletters. Follow him on X @ewolffmann.

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