We all know that volatility is a normal part of investing, but when it occurs our patience is tested and managing our emotions can be challenging. Emotional reactions to market events are perfectly normal. Investors should expect to feel nervous when markets decline, but it’s the actions taken during such periods that can mean the difference between investment success and shortfall. How we handle these headwinds is what makes the difference.
This year volatility has not been contained to just stocks. Bonds have been almost as volatile as stocks. As of the first week of May, the US Aggregate Bond Index was down approximately 10.40% year-to-date. This has resulted in diversified portfolios not responding to market headwinds as we would expect. However, we are looking for stocks and bonds to assume their traditional relationship soon.
Historically, volatility has provided opportunity for patient, long-term investors. Every S&P 500 decline of 15% or more, from 1929 through 2020, has been followed by a recovery. We will continue to add to Styles and Sectors, that we feel have become attractive opportunities. Here you will find a chart from Dimensional Fund Advisors showing the intra-year volatility of the S&P 500 Index for the past 20 years.
We are here for individual discussions and thank you for allowing us to “steer the ship” during this storm. Please feel free to call if you have any specific questions or needs. Stay safe and healthy and we look forward to talking soon.