June 2019

Stock Market Volatility

Are you feeling like the stock market is more volatile than ever? This type of market volatility is why most of you set up your IRA LLC or Solo 401(k) to begin with. 

For many investors, the swings in the stock market over the past eighteen months have been scary. On some days the market moved up 500 points, only to drop again the next day. The year 2018, was an especially bumpy ride with a 9% drop in market value in December alone. Such events provide a fresh reminder of the 2008 meltdown. Let’s look at some numbers for the S&P 500:

1/26/18 closing tick: 2,872
2/07/18 closing tick: 2,581
9/32/19 closing tick: 2,905
12/24/19 closing tick: 2,351
06/10/19 closing tick: 2.886
 

By comparing the closing tick values of the S&P 500 between January 26, 2018 and June 10, 2019, we can see that the U.S. stock market has seen some ups and downs. Worst of all, the market has gone nowhere in all this time and remained virtually flat. That’s a lot of excitement for very little return. 

Volatility in the stock market can have many different sources: The Federal Reserve can announce changes its quantitative easing life-support program for the economy, the UK can choose a hard Brexit and pull Europe into chaos which would affect the U.S. stock market, speculators could drive up prices until the bubble bursts and prices fall, yet again, or a computer glitch could send prices tumbling, like in the Fast Crash of 2010. 

Here is an article explaining how the next market downturn could result in a substantial loss of wealth: https://www.marketwatch.com

Investors have no influence or control over these market forces, rendering them virtually powerless. However, investors don't have to swallow the bitter pill of volatility. There are more stable asset classes to choose from.