Maneuvering Through Volatility

Actionable investment strategies in the face of volatile markets

Key Points:

  • Volatility has returned to markets and is likely to stay for some time
  • Timing markets is difficult to do with any real consistency 
  • Staying invested and diversified, and limiting downside risk, are key to weathering volatile markets

Heightened volatility has returned to markets

Volatility has returned to markets in an unexpected way. However, there were underlying indicators that pointed to an increase in volatility prior to the COVID-19 pandemic.

Volatility May Be Here to Stay for the Foreseeable Future

Market volatility can lead to poorly timed selling

Human behavioral biases drive investors to act. Sidestepping the market’s worst days would result in greater rewards vs. missing the market’s best days, so the desire to act is rational. However, it is extremely difficult, if not impossible, to time the market with any real consistency.

Staying Invested Through Market Volatility

Stay invested through volatile market periods by protecting on the downside

A portfolio that limits the amount of downside capture may outperform over the long-term, even if it sacrifices some of the upside capture.

the power of superior down capture

Diversification

Historically, US vs. foreign equity performance is cyclical and foreign equities have historically provided meaningful diversification benefits.

Diversifying with Foreign Equities

Potential Solutions

The views expressed herein may not be reflective of current opinions, are subject to change without prior notice, and should not be considered investment advice. The information provided should not be considered as a recommendation to purchase or sell a particular security.