Portfolio Advisors Blog

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Is Market Volatility Like this Normal?

Yes.  While stock market volatility is unsettling, it is also quite normal.  We have provided two graphs that help demonstrate stock market volatility.  The first graph, "US Market Intra-year Gains and Declines vs. Calendar Year Returns," shows both the "highs" and the "lows" for each year from 1979 through 2014.  The black and red bars show the "highs" and "lows" of the market for each year.  The blue bar shows the actual return recorded for the year.  You will note that the calendar year return is often very different from the "highs" and "lows" that occurred during each year, and it is instructive to note that during this 36 year period, positive returns were achieved 83.3% of the time.  For further perspective, you may also view the second graph, "US Large Cap Market Intra-year Gains and Declines vs. Calendar Year Returns."  This graph provides even greater perspective as it looks at the largest US stocks for the period of 1926 through 2014.  During this 89 year period positive returns were achieved 73.3% of the time.  Both graphs provide a visual perspective of just how "normal" yearly market volatility is.  They also provide evidence which shows that investors that have remained disciplined have historically been rewarded for staying in their seats during these periods of unsettling volatility. 

Click below to view each graph.

US-Market-Intra-year-Gains--Declines-vs-Calendar-Year-Returns.pdf

US-Large-Cap-Market-Intra-year-Gains--Declines-vs-Calendar-Year-Returns.pdf


 

 

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