Volatility and you by David Maxwell

Danielle Forsman |

When the stock market performs the way it has for the first half of this year it creates great trepidation in the hearts and minds of investors.  Volatility is a normal characteristic of the market itself.  Volatility is a byproduct of market uncertainty from issues such as inflation, energy, legislation, war, geopolitical events, or any other number of issues just to name a few.    The media is now claiming we are in a bear market which we probably are.  A bear market is defined as being when a market index falls by 20% on a prolonged basis.  As of June 30, 2022 the S&P was down 19.97%, the Dow down 14.44% and the Nasdaq down 29.22%.

Understanding the basic workings of the market itself combined with an equal understanding of your investments and how they behave in certain markets will go a long way in alleviating your anxieties.

If you review the Ibbotson Chart otherwise known as the “Mountain Chart”, you will notice two key points.  One, the market has always risen over TIME even when market recedes. And two, the chart also shows that the market level did return to previous level highs.  The Ibbotson chart was first authored by Roger Ibbotson and Rec Sinquefield in 1982.  It should be remembered that this chart is only an historical interpretation of the market itself and in no way what so ever should it be construed as an absolute guarantee that the upward trend will always continue.

Your experience in enduring downturns in the market may give you some comfort that the market may return to the level it was before the downturn.  This is why investing in quality investments is a strategy to consider as it may provide confidence about market performance.

In my fifty years in the investment business, I have seen these market ups and downs many times.  That is to say I have seen this movie before, I just don’t know how long the movie will last!

David Maxwell, AAMS, CEBS

This material is for general information only and not intended to provide specific advice or recommendations for any individual.  All performance is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.  Investing involves risk, including the loss of principal and there can be no guarantee the strategies promoted will be successful.