Let’s Talk About Volatility

Some investors view the stock market as a source of entertainment, while many view it a source of stress and concern.  Your view may have a lot do with whether it’s been going up or down recently.  And in today’s media saturated world, there is usually someone with an unhelpful agenda attempting to influence how you think about the markets.  Financial media is a big business, so creating excitement and sometimes panic is how advertising gets sold.

Since before this year even started, we’ve been focusing on five key themes for this 2021 that are being driven by our economy, as well as the Federal government’s monetary and fiscal posture:

  • Public market fixed income will suffer
  • Stock markets will benefit
  • Extreme volatility could erupt at any time
  • Private markets can play a larger role in your portfolio
  • Tax rates will increase

Despite a few hiccups here and there, we haven’t seen any significant volatility in the stock market in 2021.  Yet.  But we think it’s coming.  And we think it could happen without any kind of signal for investors.  Maybe we will only get a 5% drop in one week, but we think investors should be prepared for a double digit downwards movement that could occur in even a single day.  This doesn’t mean that stocks won’t do well, or that investors should sell out now.  It just means that we should make sure we are all prepared for the relative calmness we’ve all enjoyed for the last 15 months to come to an end.

We see a number of catalysts for this extreme volatility.  Some are the normal risks that stock market investors have faced for years, and some are being driven by our very unusual economic situation as the world attempts to emerge from a pandemic.  We think crypto-currencies are a growing risk that could eventually threaten the global financial system.

In this Quarterly Market Report, we talk more about volatility.  We lay out how the risks might affect you and your portfolio, and just how dangerous it could be.  And we show you how we think you should prepare for this challenge, and perhaps how it can be used to increase your investment performance.

Disclosure: This communication contains general investing information that is not suitable for everyone and is subject to change without notice. Past performance is no guarantee of future results and there is no guarantee that any views and opinions expressed will come to pass. The information contained herein should not be construed as personalized investment advice, tax advice, or financial planning advice, and should not be considered a solicitation to buy or sell any security. Investing in the stock market and the bond market involves gains and losses and may not be suitable for all investors.