Stock Market Volatility

By Chris Perras, CFA, Chief Investment Officer.

Investing requires patience and discipline, yet flexibility.  Volatility returned to the markets in 2018 as the Federal Reserve ramped up its interest rate increases and tightened monetary policy from late January through mid-December.   In the public investment markets, volatility is a given.  Volatility is not a four-letter word!  In fact, individual investors should yearn for periods in the market with increased volatility.  The OHFG “Core Four” process your advisor to tactically adjust your “at risk” asset allocation based on upon market volatility, our forward-looking views of the markets, and valuation anomalies the market presents.

Exhibit 2 shows the performance of markets subsequent to declines of 10%, 20%, and 30%. For each decline threshold, returns are shown for US large cap, non-US developed markets large cap, and emerging markets large cap stocks in the following 12-month period. While declines in equity markets may cause investor concern, the data provides evidence that markets almost always have positive returns after a decline.

Average Compound returns for stock in a following 12 Month Period

The increased market volatility in 2018 underscores the importance of following an investment approach based on diversification and discipline rather than emotion. OHFG’s “Core Four” asset allocation can help strip both fear and greed from your investment outcomes which may help provide more peace of mind in retirement.

While the team at OHFG cannot control markets, we can control how we invest your hard-earned savings.

Views and opinions are subject to change without notice. Data cited is believed to be reliable but is not guaranteed. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investing involves risk and past performance does not guarantee future return.