Our Volatile Stock Market

The S&P 500 is down 1.13% today, a day on which not much happened. I generally believe that stock market prices are rational. But the U.S. stock market just seems too volatile to me.

If the stock market went up by 9% in one whole year, then it would be a pretty good year. What could have happened today to cause the market to go down by 1.13% in just one day?

The S&P 500 is worth about 12.7 trillion, this means that investors think that the five hundred biggest U.S. stocks are worth $127 billion less today than yesterday. In fact since the S&P 500 captures only part of the economy, investors probably believe assets in the U.S. are worth at least $150 billion less today than yesterday. Why such a huge change?

My faith in markets, however, is greater than my faith in my own ability to understand markets. Thus, I suppose there probably is some good reason for why the U.S. stock market is so volatile.