The History of Market Volatility

With now three quarters of 2022 in the books, we continue a rollercoaster of a year for capital markets. From the start of a bear market selloff at the turn of the new year, to what seemed like a recovery gaining legs in the summer months, back to testing bottoms at the end of September, markets have been all but consistent this year.

Source: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/


That said, it is important to widen the lens. This type of volatility is normal in the equity market. Historically, the S&P 500 sees on average an intra-year drop of 14%. Further, only 9 of the past 41 years have seen stocks close down for the year. That means in that time frame 78% of years saw positive market returns.


The other side of this coin is the bond market. Historically, investment grade bonds (as defined by the Bloomberg U.S. Aggregate bond index) have had lower volatility.

Source: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/


This year the globe is fighting inflation by increasing interest rates, this has led 2022 a draw down not seen in the last 45 years.


With the large decline in bonds this year, this does offer a silver lining, as there are now offering the highest yields since the Great Financial Crisis.


When we put together stock and bond volatility in the context of a 50/50 asset allocation, and look at the worse 5-year stretch from 1950-2021. Investors still saw a positive return.

Source: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/


To underscore the importance of having a disciplined long-term view, take a look at some of the largest single day moves in the past 20 years:

Source: https://www.cnbc.com/2022/03/09/you-may-miss-the-markets-best-days-if-you-sell-amid-high-volatility.html


We recognize the headlines that surround us and the fear that comes with economic uncertainty. It reminds us of a quote from legendary Fidelity mutual fund manager Peter Lynch, that said:


“Every recession brings out the skeptics who doubt that we will ever come out of it, and who predict that we will soon fall into a depression, when new cars will sit unsold in the showrooms forever and houses will stand empty, and the country will go bankrupt.”


As we move forward together through these uncertain times, Cassady Schiller Wealth Management will continue to strive to stay Ahead of the Curve.


DISCLOSURE: The information contained herein has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy. Cassady Schiller Wealth Management is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only, are subject to change from time to time and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.