Stock market volatility has remained elevated as we move through the fourth quarter of 2022. Financial markets are experiencing bigger moves up and down as investors navigate a long list of concerns, including Federal Reserve interest rate hikes, heightened geopolitical risk, and 40-year high inflation readings. In addition, some of this volatility has been attributed to a lower volume of overall stock trading and the increased usage stock & index option contracts. We wanted to provide some historical context around stock market volatility and discuss how to think about your portfolio during periods of increased volatility.
First, the best and worst trading days historically occur in clusters. Second, timing the market is almost impossible due to the close proximity of good and bad days. For example, earlier this month the S&P 500 registered its 15th biggest daily return since 1970 after the latest inflation data suggested price pressures may be easing. The 5.5% S&P return on November 10th followed an extremely volatile September and October. This is a prime example of how market volatility occurs in groups.
To try and attain your long-term goals, we recommend staying balanced and diversified. Different asset classes react to market conditions in different ways. Diversification spreads your investments around so your exposure to, and the potential impact from, any one type of asset may be limited. More importantly, focus on the long-term rather than day-to-day price swings. History indicates lengthening your time horizon increases the odds in your favor. Should you have any concerns around market volatility, don’t hesitate to reach out to our team.
And in the event we don’t speak ahead of time, we wish you a happy and healthy holiday season,
Dennis P. Barba, Jr.
CEO & Managing Partner
Michael P. Finkelstein, CFA
- The Wall Street Journal
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the authors and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. Past performance is no guarantee of future results. CAR-1122-02979