Market volatility: Perspective and resources

October 12, 2018


It's been a while since there’s been a drop in the markets as sharp, broad, and sudden as the one that's happening now.

After an extended period of relative calm and steady market gains, we've entered a period when investor sentiment is getting shakier. Geopolitical tensions between the U.S. and China are ratcheting higher, nervousness is increasing about the approaching corporate earnings season, and interest rates are climbing.

Taking a step back for some perspective

It's important to help your clients remember that corrections and bear markets happen often. From 1980 to 2017, there were 11 market corrections and eight bear markets. That means there was an average of one attention-grabbing downturn every two years.

Another lesson from history is that stock market sell-offs related to geopolitical events are often short-lived.

Some of the investor angst may be related to the belief that rising interest rates are a harbinger of poor stock returns. The reasoning goes that higher rates make bonds relatively more attractive versus stocks and that they put a brake on economic growth, which in turn weighs on corporate profits. Vanguard research, however, suggests otherwise. We looked at 11 periods of rising rates over the past 50 years and found that stock market returns were positive in all but one of them. In addition, those periods together produced an average annualized return of roughly 10%—not a performance to be feared.

High stock valuations have been a concern as well, especially since the start of 2018. The recent market decline, in that context, is a sign that valuations are moving closer to fair value—a healthy adjustment that leaves more room for upside.

Resources to help ease anxiety

A framework for effective client conversations

While some clients can take market volatility in stride, some can't. Those who become anxious when things become unsettled sometimes think the best solution is to exit the market and move to the sidelines.

Unfortunately, such behavior can dramatically affect the carefully conceived investment plan you've helped them create and even result in future lost returns. Market-timing rarely turns out well, since the best and worst days often happen close to each other. In many cases, timing the market for reentry simply results in selling low and buying high.

Use our Client Relationship Center™, with its framework and coaching aids, to help your clients accept that market volatility is a normal part of investing.


  • All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.


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