Given the last two months in the U.S. stock market, let’s talk about volatility, aka market fluctuation. It’s hard to “keep calm and carry on” when you see your accounts plummeting into the red. Even if you’re a long-term investor and are mentally prepared to weather the ups and downs, giant swings in the market can be unsettling. Depending on your risk tolerance and time horizon, volatility may be especially difficult to handle.
The end of 2018 saw more than its fair share of volatility. The chart below lists the most recent largest daily point losses for the Dow Jones Industrial Average – i.e. those days that saw the largest drop between a given day’s close and the close of the previous trading day.
| Date | Net Change | Percent Change |
| October 10, 2018 | -831.83 | -3.15% |
| October 24, 2018 | -608.01 | -2.41% |
| November 12, 2018 | -602.12 | -2.32% |
| December 4, 2018 | -799.36 | -3.10% |
| December 24, 2018 | -653.17 | -2.19% |
| January 3, 2019 | -660.02 | -2.83% |
Now consider the most recent largest point gains for the Dow:
| Date | Net Change | Percent Change |
| October 16, 2018 | 547.87 | 2.17% |
| November 7, 2018 | 545.29 | 2.13% |
| November 28, 2018 | 617.70 | 2.50% |
| December 26, 2018 | 1,086.25 | 4.98% |
| January 4, 2019 | 746.94 | 3.29% |
| January 30, 2019 | 434.90 | 1.77% |
The swings are a veritable roller coaster ride. Gains made on November 7th were wiped out on November 12th. The index plunged on December 24th but rallied on December 26th, then plummeted again on January 3rd only to swing back up on January 4th. If you were feeling a bit nauseous, you weren’t alone.
The good news is that the market as a whole has regained significant ground since the fourth quarter of 2018. The screenshots below model the Dow, S&P 500, and NASDAQ indexes for the period beginning October 1, 2018 and ending January 30, 2019. (Charts from Morningstar).
Dow Jones Industrial Average S&P 500
NASDAQ Composite
It’s difficult to say what will happen in the coming year, much less 3 or 5 or 10 years down the road. For some, volatility creates attractive buying opportunities. For others, it only incites anxiety. If you’re one of the latter, consider scheduling a meeting with us to evaluate your situation and perhaps realign your portfolio so the next bout of volatility isn’t such a scary ride.
Disclosures
This memorandum expresses the views and interpretations of the author alone as of the date indicated and is subject to change without notice. NorthFork Financial (NorthFork) has no duty or obligation to update the information contained herein. Further, NorthFork makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit, there is also the possibility of loss.
This memorandum is being made available for educational purposes only and should not be used for any other purpose, including specific investment advice. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell of solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein is based on information derived from independent third-party sources. NorthFork believes the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions upon which such information is based.