Are You Burnt Out From The Recent Market Volatility?

Many investors are feeling overwhelmed and, frankly, a little bit burnt out after this week’s stock market volatility. Since the start of the COVID-19 pandemic, it seems as though market fluctuation has been the “new normal.” From the initial market crash, we collectively experienced in early 2020, there have been several dramatic highs and lows that have left investors, particularly those nearing or in retirement, uneasy. 

It can be tricky to navigate market volatility but, when you work with our team, it’s important to keep in mind that we have taken potential market volatility into account when creating your investment philosophy, withdrawal strategy, and unique financial plan. 

With that being said, let’s dive into a few important points to keep in mind in the midst of this current market drop. 

What’s Causing Volatility in the Market Right Now?

First, let’s recap what happened in the markets this week: Stock markets hit the lowest they’ve been in over a year on Monday, with the DOW falling almost 2%, the S&P 500 falling 3.2%, and the NASDAQ falling 4.3%. The S&P 500 is on a 5-week losing streak right now, which hasn’t happened since 2011.

There is currently no place to hide in the market. The S&P500 is down 17.4% YTD, the DOW down 12.5% YTD, the NASDAQ down 26.9% YTD, Bitcoin down 38.5% YTD, the bond market down 9.3% YTD, and even cash isn’t safe due to high inflation.

There are a number of reasons that both the stock and bond market are currently in flux. Between Federal Reserve policy changes, interest rate hikes, and inflation, the U.S. was already in a precarious spot when it comes to market stability. When you add in the Russian-Ukrainian war and current COVID-19 lockdowns in China, volatility felt inevitable. The global market, as well as the global supply chain, have been disrupted. 

Until the global supply chain issues we’re currently seeing have been resolved, and until inflation starts to come down, investors can expect more market volatility in the near term. 

Historical Data

It’s worth noting that, while 2022 will go down in the history books as one of the worst starts to the year in the stock market, it’s possible that we could see a rebound by year end. If we look at the historical data from the ten worst January-April starts to the year, in 4 of those years the stock market was up by year-end.

Of course, this doesn’t take away the feeling of frustration and stress many investors have. That’s why it can be helpful to look toward the silver lining, or opportunities, that come out of volatile markets.

The Silver Lining

There are always opportunities to “buy low” in the midst of market volatility. Continuing to invest as originally planned or even reconfiguring your strategy to buy assets of a specific class while prices are low can help you gain more ground and pad your nest egg over time. Often, advisors will tell clients to view this not as a market downturn but as the market going “on sale.” Savvy investors understand that, while there may be more pain in the near term, continuing to stay the course will pay off in the long run. 

Currently, The Dala Group believes that some very good companies have been oversold due to fear in the market. The same is true of the bond market. This presents unique buying opportunities for our clients. Again, this isn’t a silver bullet solution but a way to make lemonade from lemons. Although we can’t always control what happens in the market, we can control our response. Keeping our eyes open to these opportunities can allow us to increase the overall value of our client's portfolios over the next 10+ years. 

Take Time To Assess

In times of market turbulence, it’s worth taking a moment to self-assess how you’re feeling. If volatility in your portfolio is causing a significant amount of worry, you may have a lower risk tolerance than you’d previously thought. There’s no shame in this! Your money should be invested in a way that you feel comfortable with. If you’re feeling like market ups and downs have been occupying most of your thoughts lately, please reach out to us. Understanding your risk tolerance fully can help us to reassess how to invest or ways to adjust your strategy in future years to avoid undue stress.