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Can You Live With Today's Market Volatility?

Can You Live With Today's Market Volatility?

March 01, 2022

Market Roller Coaster

This is the 6th correction (correction is defined at between 10-20% decline from peak) that we have had in 5 years, and the 16th correction since 2009 with the average decline of 11% versus current down 12%, and the average duration of 56 calendar days versus 51 days currently. Corrections occur when the market multiples contract, this time we have contracted 20% to 18.3x, but earnings are flat to growing. Current expectations are that earnings will grow this year. A bear market/recession happens when multiples contract AND earnings drop as they did in 2020 and in 2009. Again, current expectations are that we will continue to see earnings growth through this year and next.

What does all this mean? Markets don’t go straight up, and they don’t go straight down. Corrections and volatility are a part of the market cycle. That’s one of the ways markets uncover opportunities. Some people, for various reasons both financial and psychological, can’t live with this type of volatility. There are ways to mitigate some or all that risk. If you are one of those people, reach out to a financial advisor and ask them to help you determine what risk level will let you sleep at night.