Navigating a Faster, More Reactive Market

Recent reporting seasons, and markets in general, have felt wilder than in the past. Two structural changes the global rise of algorithmic trading and the enormous growth in exchange traded funds (ETFs) can help explain why. Those forces can amplify short term moves. 

Algorithmic strategies (computers buying and selling shares automatically using pre-set rules rather than humans placing trades) execute trades in milliseconds, reacting to price moves, news feeds and technical signals long before most human traders can act.  

When many algorithms use similar inputs, they can behave in tandem, accelerating both selloffs and rallies. At the same time, ETFs concentrate large pools of investor capital into single instruments. When investors rush to buy or sell ETF units around results or headlines, those flows must be absorbed by the underlying stocks and that can magnify price swings in affected sectors. 

There are several statistics that point to increased volatility in the market 

1) Bigger and more frequent price swings 

Recent reporting seasons have seen unusually large share price movements on result days: 

• In the August 2025 reporting season, ~40% of ASX-listed companies moved ±5% on the day they reported earnings — roughly double the long-term average. That means nearly half the stocks had sharp reactions to earnings news, up markedly over history. 
• Broad moves were evident: over 30% of ASX 50 stocks swung by more than ±3% on results day.  

Historically, only a small minority of companies had such large one-day moves during reporting season, with typical reaction sizes much smaller. 

2) Volatility has increased 

The ‘standard deviation’ of the market, which is a statistic that is a direct measure of volatility —has risen ~60–70% over ~20 years, shows the market’s reaction to earnings has increased considerably. 

3) Market structure is amplifying volatility 

• Today, most of the price adjustment to earnings announcements occurs immediately as results are released, rather than gradually over days or weeks as has happened in the past.  
• In the mid-2000s, stocks would drift after earnings; now the jump tends to occur right at the announcement, increasing the visible volatility on reporting days.  

4) Misses are punished harder 

• Recent data shows that stocks missing expectations have been penalised roughly three times more.  

For long term investors those statistics are a reminder, not a reason to panic. Fundamentals a company’s cash flows, competitive position and profitability — don’t change because prices swing faster. High quality businesses and diversified portfolios remain the key to capital preservation.  

So what’s our advice?  Focus on diversification and quality holdings rather than trying to time short windows. Markets have become quicker and noisier, but for those holding high quality investments the right response is still calm patience, not panic.