Enduring volatility: Two charts
It's been a bit of a roller coaster ride the past few weeks in the global markets, but that recent volatility should not be unexpected. As we discuss in our 2019 outlook, we believe:
- With slowing global growth, disparate rates of inflation, and continued policy normalization, periodic bouts of volatility in equity and fixed income markets are likely to persist and perhaps accelerate.
- Our near-term outlook for global equity markets remains guarded, but a bear market would not appear imminent given that we do not anticipate a global recession in 2019.
- Risk-adjusted returns over the next several years are anticipated to be modest at best against the backdrop of limited growth and less accommodative policy.
To support you in your conversations with anxious clients, here are two charts that can help you reinforce:
- Hope is not lost. The risk/return profile improves with time.
- It's tough to outsmart the markets. In many cases, timing the market for reentry simply results in selling low and buying high. And usually, when the urge to change is strongest, the benefit of the change is weakest.
- A diversified portfolio can help smooth the ride.
The risk/return profile improves with time
Note: Volatility is measured as the standard deviation of time-period returns for the return period specified, (i.e., the one-month volatility is the standard deviation of one-month returns).
Sources: Vanguard calculations based on data from Bloomberg, as of January 4, 1988–December 31, 2017.
Timing the market is challenging: The best and worst trading days happen close together
A framework for effective client conversations
Use our Client Relationship Center™, with its framework and coaching aids, to help your clients understand that market volatility is a normal part of investing.
- All investing is subject to risk.
- Past performance is no guarantee of future results.
- The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.