Navigating Market Volatility in Times of Uncertainty

While easy to say, it doesn’t make the experience easier, which reminds me of an experience I recently survived. This experience did not include wild stock market swings or interest rate moves. While we all know those things can be very stressful, they pale in comparison to my plight. You see, my friends, I survived raising a teenager.

 

My daughter, my oldest child, is a wonderful kid. My wife and I, like many parents, have invested a significant amount of time, effort, and money into producing a productive, high functioning adult. She’s also the one we are counting on to take care of us in our old age, so she’s something of a retirement plan. She is smart, caring, talented…and dramatic. She is our own personal financial market and the lessons she has given us are very applicable to navigating the current market environment.

 

When markets are turbulent, the instinct to sell and “wait it out” can be overwhelming. But history shows that staying invested is often the best course of action. Trying to time the market—jumping in and out based on short-term predictions—rarely works. In fact, missing just a handful of the market’s best days can significantly reduce long-term returns. Historical data from Morningstar Directⁱ shows that a $10,000 investment in the S&P 500 between January 1, 1995, and December 31, 2024, would have grown to $224,278 if fully invested for the whole period. However, missing just the ten best days during this period would have reduced the portfolio value to $87,403 — a decline of well over 50%. Missing the fifty best days would result in a portfolio value of only $6,718, an actual loss in portfolio value from the original $10,000.    This includes incredibly turbulent market periods like the Dot-Com Bubble, Great Financial Crisis, and COVID-19. This underscores the importance of staying invested through market volatility to capture long-term growth opportunities.

 

Believe me, when my daughter burst into tears or yelled at me for calmly suggesting she might clean her room, the thought of trying to sell her to her aunt for a few years crossed my mind (my sister declined). I recognized the long term pay off when she called me from college this fall and asked my opinion on something because, “Dad you know more about this than I do.” It was a very nice reward for keeping her after all. So, instead of reacting emotionally to market dips, focus on the principle of time in the market, not timing the market. The market will recover, just as my sanity as a parent has.

 

A well-diversified portfolio is a critical key to weathering risk and challenging times in the markets. By spreading investments across various asset classes (stocks, bonds, real estate, commodities, etc.) and geographies, you reduce your exposure to non-systematic risk. When one part of your portfolio underperforms, others may offset those losses. Diversification doesn’t eliminate all risk, but it does stabilize returns over time. For example, I also have two sons, and, while challenging in their own right (more on this in future articles when markets are sullen, grunting and eating all the food in the house), they offered a bit of solace when my daughter was trying our patience. I could just sit with them while they played video games knowing that no words would be spoken at all, allowing me to regroup. Having a diversified approach to investing is similar, smoothing out risk and return when one part of your portfolio is misbehaving. This approach helps ensure your financial goals remain intact despite short-term turbulence.

 

Market downturns can also present opportunities. For long-term investors, they create moments to consider tax-loss harvesting and portfolio rebalancing. Tax-loss harvesting allows you to sell underperforming assets at a loss which can offset taxable gains elsewhere in your portfolio. This strategy turns today’s losses into future tax savings by keeping more of your money in your pocket. Rebalancing accounts in down markets allows you to realign your portfolio by buying undervalued assets and selling those that have become overweighted. This “buy low, sell high” approach positions your portfolio for future growth. These strategies are akin to finding teachable moments during my teenager’s outbursts—turning volatility into opportunities for growth. Generally, after an outburst from my daughter there was a chance to have a conversation around the source of the drama and give advice or perspective on how it may be handled better in the future. Whether she was receptive in those moments or just too tired from the exertion to put up a fight I’ll never know, but we were rewarded for those lessons when she called us early in her freshman year at college, after living with other kids her age for a few weeks, and told us, “Mom, Dad, thank you for raising me right.”

 

One final anecdote is that historically, bear markets are significantly shorter than bull markets. Data on the S&P 500 shows that since World War II, the average bull market lasts four years and four months while the average bear market lasts just over 11 months.ⁱⁱ The gains made in those bull markets have significantly outweighed the losses from the bear markets. And while past performance of markets is no guarantee of future performance, we can gain some comfort from history that down markets will be temporary and with patience, a long term approach to investing, having a diverse portfolio and taking advantage of the opportunities that the market presents to realign your investments to your goals you will come out of this turbulence well prepared to be take advantage of the next bull market.

 

This week’s market swings may feel unsettling but remember that volatility is temporary while long-term growth is enduring. Stay invested, embrace diversification, and use downturns as opportunities for strategic adjustments. Like raising a teenager, investing requires patience, resilience, and trust in the process. My daughter has shown me that even when you’re not sure how things will turn out, thoughtful investing and staying the course can lead to a meaningful payoff in the end. I do still wonder what I could get for my sons…

 

We are committed to helping you navigate these times and keep your investments aligned with your personal goals. Please reach out to your advisor if you have any questions, or just someone to talk to about your situation and how you are feeling. That is why we are here. ⁱⁱⁱ