What Drives Market Volatility?

Markets rarely move in a straight line. Volatility arises when there is a disconnect between what participants expect and what actually unfolds. It is not simply the presence of positive or negative news that moves prices, but the element of surprise and the market’s positioning at the time the news breaks.

Unexpected inflation figures, policy shifts, geopolitical disruptions, or even sharp changes in sentiment can all trigger periods of heightened volatility. These events force the market to reprice risk quickly, often resulting in accelerated moves across asset classes.

For traders, the key is understanding that volatility is not random, it is a response to uncertainty. Identifying where expectations may be misaligned with reality is often what separates reactive decisions from informed ones.