May 24, 2022
Volatility – Like it or Not – is a Feature of Markets
Stock and bond markets alike are sorting their way through a potent brew of uncertainties these days. War, inflation, supply constraints, rising interest rates, growth concerns, and even crypto-currency dislocations are combining to drive markets lower by the day.
It’s certainly no fun to sit through tumultuous markets, but turmoil like we’ve seen recently is normal from time to time; our expectations for what markets deliver to investors is built on long-term global market history that includes many instances of such turmoil. We derive asset allocations from this long history that match up with your plans, goals, mission, and tolerance. So, if nothing has changed for you in the long term, then your portfolio shouldn’t change in the short term.
It sure would feel good to do something, though. The decades-long market experience and data that we use to build expectations for the future, however, also show that there are no signals for times to exit and re-enter markets. So, as much as it feels like doing nothing is incurring more pain than necessary, history shows us clearly that there is more pain associated with trying to time market actions.
Days, weeks, or even months like this are a recognition that being invested to generate returns over the long run means enduring volatility in the short run. It is the cost of being invested.
That’s a very long way of saying “do nothing”. But that still remains the best way to sum up the best possible response to markets like this one.