Market Sound Bite: Market Volatility Is Up… Again

Monday was a challenging day for the markets, as we saw sharp declines of 2% in U.S. large-cap stocks.1 The rout was fueled by declines in technology stocks, with mainstay names like Apple, Nvidia and Advanced Micro Devices declining by 5% or more. This year, it seems like we have experienced heightened market volatility — October was a painful example, with several days of sharp market declines that wiped out the gains we reaped earlier in the year.

Some of this volatility certainly may be attributed to the recent midterm election — data shows that market volatility can go up during election years. But you may still be wondering if this level of volatility is “normal.”

What Is “Normal” Market Volatility?

In fact, on average, markets historically have pulled back by 5% three times in any given year. Going back to 1980, the S&P 500 has had an average intra-year decline of 13.8% from peak-trough — but the market finished with a positive return in 29 out of those 38 years. There can be some years when the market is abnormally calm, like we experienced in 2017. In that year, the peak-to-trough decline was just 3% — the smallest intra-year pullback since 1995.

U.S. Market Intra-Year Gains and Declines vs. Calendar-Year Returns2


Accepting Volatility in Investing

As hard as it can be to embrace market volatility, sharp swings on the upside and downside are a normal part of investing. One of the most important investment principles to remember is that risk and return are related. What does that mean, exactly? If stock markets offered investors a smooth ride all the time, then there would be no risk and everyone would rush to invest in equities, thereby limiting the potential returns you could gain.

When we look back at history, it’s clear that investors who have been able to weather the ups and downs of the market have been rewarded for their discipline.

Capital Markets Have Rewarded Long-Term Investor3

Monthly growth of wealth ($1), 1926−2017



Return data represent past performance and are not indicative of future results. Historical returns of indices do not reflect applicable transaction, management or other applicable fees, the incurrence of which would decrease historical performance results. Index information has been compiled by Wipfli Financial from sources Wipfli Financial deems reliable, but has not been independently audited or verified. Historical performance results for investment indices and/or categories have been provided for general comparison purposes only. Indices are unmanaged and unavailable for direct investment. Any charts and graphs represented herein are for informational purposes only and cannot in and of themselves be used to determine which securities to purchase or sell, or when to purchase or sell securities. 

Market Volatility Is Up... Again

Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
Rafia Hasan
Rafia Hasan

CFA, CFP® | Principal, Chief Investment Officer

Rafia Hasan, CFA, CFP®, is the Principal and Chief Investment Officer for Wipfli Financial Advisors, based in Chicago, IL. Rafia leads Wipfli Financial's Investment Committee and has a deep knowledge of the financial markets, specifically in the areas of alternative investments and private equity. She also specializes in personal financial planning and estate planning for women investors.

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Market Sound Bite: Market Volatility Is Up… Again

time to read: 3 min