Does Volatility in the Market Benefit You?
After a year of low volatility and great market growth in 2017, what should we expect in 2018? If you look at the following chart you will notice that years of low volatility do not usually repeat. I don’t see any years below where the line is perfectly flat for years at a time. So this tells us that a year like last year, with little volatility will likely not happen again this year.
So what about performance? Is volatility bad for your portfolio?
Since the market has been strong for the past year, it is natural to ask if it can continue this way in the days ahead. When we see volatility that causes the market to have days like Monday, 1/29/18 with a pullback, it gives us some encouragement that everyone doesn’t think that everything is SO rosy.
Look back at a historical post where we discussed the market’s maturity in a cycle based on investor’s euphoria and optimism, in a quote from Sir John Templeton. https://financialdesignstudio.com/fridays-financial-update-5-19-2017/
With days like Monday where we have a decent pullback it shows that investors are still not in a state of euphoria, where we tend to see the peak of an economic cycle.
We do expect to see increased volatility in 2018, so hold on and make sure that you have a diversified portfolio. We believe there is still positive performance to be captured during the year, but it will come in the midst of a volatile market. So a market pullback like we are seeing more of in 2018, on various days, can be a good thing for you showing that there is still some upside to this market, benefiting you.