Volatility Is Normal: The Stock Market's Natural Rhythm
If you’ve been investing for any length of time, you’ve likely noticed the market doesn't move in a straight line. Stocks go up, and yes—sometimes they go down. While these dips can feel unsettling, especially during headlines filled with panic, it’s important to remember one key truth: volatility is normal.
Averages Tell the Story
Historically, the U.S. stock market has delivered strong long-term returns, but those gains haven’t come without bumps along the way. On average, the S&P 500 experiences:
- A 5% decline about three times per year
- A 10% correction roughly once every 1–2 years
- A 20% bear market approximately once every 6–7 years
These numbers aren't anomalies — they're part of the cycle. In fact, despite all the short-term pullbacks, the market has managed to trend upward overtime. Since its inception, the S&P 500 has returned an average of around 10% annually, including all the ups and downs.
Why the Market Moves
Short-term volatility is driven by a mix of factors: economic data, interest rates, geopolitical events, earnings reports, and sometimes pure emotion. Markets react quickly to uncertainty, but they also tend to correct overreactions. That’s why knee-jerk decisions—like selling during a dip—can be more harmful than helpful.
Embrace the Big Picture
Volatility often feels like a threat, but it’s actually a sign of a healthy, functioning market. Without risk, there’s no reward. Long-term investors who stay the course through downturn are typically the ones who benefit most from recoveries.
The key is to focus on your goals, stay diversified, and avoid making emotional decisions based on short-term swings. Remember: storms are part of the forecast, but they don’t stop the seasons from changing.
If you have any questions about your investment portfolio or concerns about recent volatility, don’t hesitate to reach out to an advisor at Thrive!
