It’s been a wild ride, eh? Hold onto your butts, we’re just getting started.
There’s a lot of talk about what investors are comfortable with when it comes to market volatility and churn.
Even that is buried under the daily “market move” headlines.
One day they claim investors seem to be okay with the myriad of risks in the market. The next is a massive sell-off.
Risk on, risk off, then risk on with a big gain, only for it all to disappear overnight before markets reopen.
This is generic click fodder, tracking institutional investors more than anything. This is a profound disservice to real investors like us.
I don’t care for it, and it’s worth a better look at the longer arc, especially for how we can actually use it to our advantage.
Nothing beats a chart, and we have one we can use. Here you go:
This is a fantastic visualization of the daily market volatility and churn we’re seeing, but it comes with a caveat.
It runs for about 10 years leading up to the start of this month. Things have since gotten a bit crazy.
This is the kind of stuff that we become acclimated to, and the outliers that really get scary. We’re seeing wild single-day and several-day changes in the S&P 500:
What makes it worse is the years of relative calm we’ve seen, even with the steep drop and recovery with the COVID-related lockdown.
It’s a rodeo, mostly moving nowhere as prices snap back and forth, and it is causing havoc in our core holdings and for our best laid plans.
This is especially true as market valuations remain historically high, and future guidance from companies remains profoundly unreliable.
So with all this movement back and forth, what can we do to capitalize?
Especially as we cannot count on forward economic and market indicators to continue the relentless and historic climb upwards in stock valuations?
With volatility comes a lot of interest in hedge and momentum positions. The kind that can work exceedingly well with this kind of back-and-forth stock market.
My friend and colleague, Sean McCloskey, specializes in exactly that, and from what I’ve seen he has a lot of good stuff coming down the pike.
Volatility, a sinking broad market, inflation — this can cut through it all.
