Stock market volatility is rising this year after a relatively calm 2021. Financial markets are experiencing bigger moves up and down as investors navigate a long list of events, including Federal Reserve interest rate hikes, heightened geopolitical risk, and 40-year high inflation readings. This month’s chart provides historical context around stock market volatility and discusses how to think about your portfolio during periods of increased volatility.
Figure 1 charts the S&P 500 Index’s daily price return since 1970 and overlays the top 30 and bottom 30 days. There are two important takeaways. First, the best and worst trading days historically occur in clusters. Second, timing the market is almost impossible due to the close proximity of good and bad days. As an example, earlier this month the S&P 500 registered its 15th biggest daily return since 1970 after the latest inflation data suggested price pressures may be easing. The +5.5% S&P 500 return on November 10th followed volatile trading during September and October and demonstrates how market volatility occurs in groups.
What can you do to improve the chances of achieving your long-term goals? As always, our team recommends staying balanced and diversified. Different asset classes react to market conditions in different ways. Diversification spreads your investments around so your exposure to, and the potential impact from, any one type of asset is limited. More importantly, focus on the long-term rather than day-to-day price swings. History indicates lengthening your time horizon increases the odds in your favor. Should you have any concerns around market volatility, don’t hesitate to reach out to our team.
Important Notices & Disclaimer
The information and opinions expressed herein are solely those of PFG Private Wealth Management, LLC (PFG), are provided for informational purposes only and are not intended as recommendations to buy or sell a security, nor as an offer to buy or sell a security. Recipients of the information provided herein should consult with their financial advisor before purchasing or selling a security.
The information and opinions provided herein are provided as general market commentary only, and do not consider the specific investment objectives, financial situation or particular needs of any one client. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the particular investment needs of any investor.
The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. PFG is not soliciting any action based on this document. Investors should consult with their financial adviser before making any investment decisions. There is no guarantee that any future event discussed herein will come to pass. The data used in this publication may have been obtained from a variety of sources including U.S. Federal Reserve, FactSet, Bloomberg, Bank of America Merrill Lynch, iShares, Vanguard and State Street, which we believe to be reliable, but PFG cannot be held responsible for the accuracy of data used herein. Any use of graphs, text or other material from this report by the recipient must acknowledge MarketDesk Research as the source. Past performance does not guarantee or indicate future results. Investing involves risk, including the possible loss of principal and fluctuation of value. PFG disclaims responsibility for updating information. In addition, PFG disclaims responsibility for third-party content, including information accessed through hyperlinks.
No mention of a particular security, index, derivative or other instrument in the report constitutes a recommendation to buy, sell, or hold that or any other security, nor does it constitute an opinion on the suitability of any security, index, or derivative. The report is strictly an information publication and has been prepared without regard to the particular investments and circumstances of the recipient.
READERS SHOULD VERIFY ALL CLAIMS AND COMPLETE THEIR OWN RESEARCH AND CONSULT A REGISTERED FINANCIAL PROFESSIONAL BEFORE INVESTING IN ANY INVESTMENTS MENTIONED IN THE PUBLICATION. INVESTING IN SECURITIES AND DERIVATIVES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK, AND READERS MAY LOSE MONEY TRADING AND INVESTING IN SUCH INVESTMENTS.
PFG Private Wealth Management, LLC is a registered investment advisor.