Volatility Without Meaning: Why Most Daily Market Moves Explain Nothing
By Diego Alcalá A friend wrote to me the other day, rattled. His stock portfolio had lost 8% in a week. "What is going on?" he asked. "The news doesn't justify
By Buying America Editorial · Tue Sep 15 2026 · Investing
By Diego Alcalá
A friend wrote to me the other day, rattled. His stock portfolio had lost 8% in a week. "What is going on?" he asked. "The news doesn't justify this drop." I answered with a question that threw him off: and why do you believe the market owes you an explanation?
That conversation sent me back to something I have thought about for years: our relationship with volatility. We live obsessed with understanding every fluctuation, as if markets were predictable machines running on spreadsheet logic. Reality is quite different, and the sooner we accept it, the better investors we become.
Volatility is not an anomaly. It is the natural state
Volatility is simply the variation in an asset's price over a given period, and it is as inherent to markets as gravity is to physics. The trouble starts when we try to find meaning in every single move, as though we were capable of decoding the collective thoughts of millions of participants.
After years of watching markets, I have reached a conclusion that some people find uncomfortable: most daily volatility has no logical foundation. Stocks rise or fall for reasons that range from badly programmed algorithms to the emotional decisions of investors acting under pressure. Insisting that a rational explanation exists for every move is like trying to forecast the weather by watching butterflies.
Warren Buffett put it this way: "The stock market is a voting machine in the short run, but a weighing machine in the long run." The distinction is a reminder that although prices fluctuate day to day for no apparent reason, eventually they reflect the real value of the assets, or at least move toward it.
The myth of rational markets
One of the most dangerous myths in finance is the belief that markets are rational. During the dot-com bubble, companies with no revenue traded at astronomical valuations. Was that rational? Of course not. Yet millions of investors took part in that collective madness, convinced that this time was different.
The market is made of human beings, and human beings are deeply irrational. We make decisions based on emotion, cognitive bias and incomplete information. Market psychology is dominated by fear and greed, two forces that produce extreme movements with no relationship to economic fundamentals.
I have watched identical news produce completely opposite reactions depending on the mood of the market. A positive employment report can be read as a sign of growth in an optimistic market, or as a warning of inflation in a pessimistic one. The information is the same. Its interpretation changes with the prevailing sentiment.
Why this hits differently when you invest across a border
If you are investing into the United States from Canada, or from anywhere outside it, this problem gains an extra layer worth naming. You are not only watching an asset move. You are watching it through a currency.
An investor in Toronto holding U.S. assets sees two things fluctuate at once: the price of the asset and the exchange rate between the Canadian and U.S. dollar. Some weeks the two move together and the swing looks violent. Other weeks they offset each other and a real decline looks like calm. Neither picture is more true than the other, and neither says anything about whether the underlying business is doing well.
The practical consequence is that a cross-border investor has more noise to misread, and therefore more reason not to check a screen every morning. Add the distance itself: you are usually reading about your investment in headlines written for a domestic audience, at a time zone's remove, without the everyday context a local investor absorbs for free. That distance makes the urge to explain every move stronger, and the explanations worse.
This is educational context rather than legal, tax or immigration advice, and any cross-border structure should be reviewed with qualified professionals in both countries.
The intellectual arrogance of believing you can predict
The most common error I see in investors, especially the most educated ones, is intellectual arrogance. We believe that because we have more information or better analytical tools, we can predict market movements. That excess confidence leads us to overinvest and to overplay our own ideas.
The smarter we believe we are, the more prone we become to expensive mistakes. Academics with doctorates in finance do not consistently beat market indices. Analysts with privileged access to information fail in their forecasts regularly. If those professionals cannot predict the market, what makes us think we can?
"We cannot predict, but we can prepare." Instead of trying to anticipate every move, we should focus on building resilient portfolios that can withstand the volatility that is coming regardless.
Measuring less is part of the strategy
The only sensible way to deal with meaningless volatility is to stop measuring it constantly. Every time you check your portfolio daily, you are making an emotional decision dressed up as a rational one. The best investors I know review their positions monthly or quarterly, never daily.
During the crash of March 2020, when markets fell more than 30% in a matter of weeks, investors who stuck to their long-term strategy not only recovered their losses but went on to extraordinary gains. Those who sold in panic locked in losses they never recovered.
Time is the great leveller of volatility. Movements that look dramatic on a daily scale turn into small ripples once you stretch the horizon. A 10% drop that costs you sleep today will be invisible on a five-year chart.
Living with the unpredictable
Accepting that volatility is meaningless does not mean surrendering to it. It means recognising that it is part of the price we pay for participating in capital markets. As Peter Lynch said: "You can't take the flowers without accepting the thorns."
Meaningless volatility will keep existing for as long as markets are made of humans. Our job is not to explain it or predict it, but to build strategies that turn it into an ally. Irrational prices create opportunities for those who keep the right perspective.
So, in your own case: are you still trying to find the logic behind every market move, or have you learned to live with its unpredictable nature?
Diego Alcalá
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This article is educational and informational. It is not investment, legal, tax or immigration advice, nor a recommendation to buy or sell any asset. Past returns do not guarantee future results. Consult a licensed professional before making decisions about your capital.
Originally published in Spanish on Comprando América: Volatilidad sin sentido.