Market Volatility – No Need to Panic

Eric Mikkelson |

Recent weeks have brought back a lot of market volatility, the likes of which we have not seen in quite some time. This volatility and decline in markets, and on an individual level investment account values, in our view was overdue and expected. The pullback is widespread, so some facts provide perspective:

  1. The US Stock Market averages one to two 10% or more pullbacks every year. Currently we are off just over 10% in the S&P 500 from its all-time high set on September 20th.
  2. The US Stock market averages a greater than 20% correction every three to five years. We have not experienced this since 2008-2009.
  3. International Markets are down 15% from their all-time highs.
  4. Emerging markets have reached “bear market” territory, being down more than 20% from this year’s highs, which brings the markets average PE (price to earnings) ratio down to 10.
  5. Global Real Estate, while down, is down only 5%.
  6. Bond markets total returns are down around 1% to 3%.

What does this mean? With market volatility comes opportunity. These markets can, of course, get worse before they get better, the timing of which is unknowable. With that understanding, rebalancing a well-diversified portfolio when opportunities present and portfolio allocation targets indicate, can be beneficial. For example, buying more of an investment that, while still good in the long-term, is currently most out of favor relative to other portfolio investments. In other words, “buy low”.

*Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.