Volatility Is Back, But That Is Normal
Updated: Apr 13, 2018
Yep, volatility is back. That is normal. What was not normal? The year 2017.
Look at the chart below that shows average volatility in the market. Last year had the lowest volatility in the past 25 years. During those 25 years the average daily price change was .73% compared to half of that in 2017. The market "swings" we are seeing this year may feel new, but they are normal.
Temporary swings are a normal part of investing and are often influenced by short-term news such as earning announcements, economic data, and recently "tweets".
Investing is for the long term. Unless you have a plan to "check out" tomorrow or pull all your money out in a short amount of time I would strongly encourage you to look at the big picture and not the day to day activity. The chart below has a long term view all the way back to 1975 (great year by the way, yours truly was born). It marks in orange each year's lowest point in the S&P 500 index. As you can see every year had a temporary decline and the volatility that comes along with it.
To summarize, investing is not about reacting to short term market swings or day to day news stories. Investors who can stay the course and realize volatility is par for the course have been rewarded. It’s unusual for markets to be as calm as they were in 2017.
Stay tuned for our next blog which will discuss "market corrections" and what history has taught us about them. I think you will be surprised!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.