It’s getting hot in here. The S&P 500 is again approaching bear market territory (-20% or more).
The big swings, or volatility, in the market have intensified in the past two and a half weeks. In fact, the market has moved up or down by 2% or more almost half of the trading days over that period. That type of market action can make anyone feel sick.
These moves seem to be knee jerk reactions to very specific data points. This week, earnings reports from Walmart and Target led to concern over corporate profit margins and consumer resiliency. Many investors took the news as a sign to head for the hills. After digging into the reports, the concern seems to be overblown as these issues are likely specific to those companies, and less a sign of a broader trend.
But with investor sentiment in the driver seat and lower levels of trading volume, the result can be big market moves.
Volatility is likely to remain high over the coming months as the combination of geopolitics, inflation and direction of interest rates evolves. I know it’s hard to stick with your investing plans in times like these.
Just know that a key characteristic of the market is that some of the biggest up days are clustered right around the biggest down days. If you are not invested during those big up days, your total return over the long-haul will be negatively impacted. In other words, riding out the storm may work out in your favor.
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Lindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience. Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank. She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall well-being. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider. She also serves on the board of Better Investing, a non-profit focused on investment education.