You Need a Time Machine

Main content

Projected market volatility spikes in times of crisis then drops as fears subside. Current levels are below average, but the Fed’s path to normalization of rates may lead to more typical volatility levels.

If these normal market ‘ups and downs’ are keeping you up at night, it may help if you jump into your time machine and take a look at some prior bouts of serious volatility, not the normal volatility we are experiencing currently. Over the last 50 years, the most volatile swings in the market occurred in 1987 and 2008. Those were indeed unsettled times but note that the very worst days were often within a week of the very best days. In addition, if you missed just the 30 best days over the last 50 years by being out of the market, hiding out on the sidelines in cash, your returns would have suffered significantly. Today the market is worried about a potential trade war and pricing in the worst-case scenario. So far, these proposed tariffs hardly constitute a war. However, all wars end with negotiation and some may argue that we have already been engaged in a trade war with China and this is part of the negotiation. Meanwhile, the U.S. economy remains robust and the latest ADP report shows another 231K jobs were added to the economy last month. Diversification, as always, can help to smooth market bumps. Please see page 26 of the Global Perspectives book for more on market volatility.

Footer content