The stock market has been characterized as a bull market for nearly a decade. Investors have become comfortable with a steady, predictable rise in the stock market during this time. At least for now, the steady and predictable rise in the stock market has ended. As they say on Wall Street, “Volatility has returned” to the market.
In the past month, the stock market has been characterized by being unpredictable and by having wild up and down days. Joseph Fahmy tweets below, “I was going to post a video summing up the market so far this week, but this GIF explains it better.”
In truth, these market fluctuations are more normal than abnormal. It just seems as though the market is behaving abnormally when juxtaposed with the past 9 or ten years of unusually steady growth.
Because investors have become accustom to a predictable and rising market, the volatility is wreaking havoc with their psyche. Many investors are now being whipsawed by the market–buying when they should be selling and selling when they should be buying.
Some, but not all investors have the jitters. Those with an investment plan and a solid understanding of why they are investing and what they intend to gain from their investments are likely taking the newfound volatility in stride.
This is how life is. Sometime life is a smooth ride. Sometimes it’s rocky.
Personal values and goals provide a strong anchor when life becomes stormy and people who have them tend to ride out the rocky parts of life better than those that don’t. The old phrase rings in my ears, “When the going gets tough, the tough get going.” But why? Is it determination and grit? Perhaps there is some element of truth to that. But a more likely explanation is that the tough understand this: The storm is temporary and their goals will outlast it.
I used to be an avid, competitive sailor and I’m reminded that everyone is a good sailor in calm weather. But when the weather gets stormy, whoa, watch out! As the wind increases, the effort required to sail and the danger of sailing rises exponentially. When the wind blows hard like this you quickly find out who has prepared and who hasn’t.
Is your life calm now or stormy? Are you preparing for a return of volatility in your life? Do you have a plan, clearly defined values? Are you training in calm weather so when the storm clouds roll in you’ll be ready?
These are good questions to ask every day. Be prepared!