Tuesday, February 3, 2009
Unfortunately, most individuals who have assets to invest are hesitant during this market pullback and many individuals who see this market lull as a buying opportunity don't have funds to invest. This is a common scenario during periods of increased market volatility, and often stretches out the duration of stagnant equity markets.
How volatile is this investment environment? As measured by the S&P 500, the market moved more than 3 percent in either direction during a single day only once between 2004 and 2007. By comparison, the market moved at least 3 percent in one day 40 times in 2008, and most were near the end of the year. Further, moves of 2% to 3% occurred 28 times in 2008.
For those who see no end in sight for this volatile market, remember: we have been here before! Between 2001 and 2003, the market moved between 2% and 3% an average of 20 times per year, and that was over a three year period. We then moved on to enjoy a relatively stable period between 2004 and 2007. Thus, history indicates that the increased volatility we are seeing in the market is not the "new norm" and we should expect volatility to subside at some point, creating a more reasonable investment environment for all.