Fellow Investors,

Please enjoy this Market Reflection from our partners at Gradient Investments, LLC. Please call our office if you have any questions. 

- Brad Cooper

MARKET REFLECTIONS
"Market Volatility Perspective"

The stock market has had an increase in the level of volatility over the past several months.  Generally, more volatile markets can have a negative impact on the psyche of investors because of the perceived possibility of greater loss. The reality is there are always fluctuations in the stock market and bursts of volatility are quite common.  Our stance is that, while volatility and uncertainty can create higher concern in the short term, investment opportunities are created by volatility that can pay off handsomely in the future.

A common measurement of stock market volatility is the CBOE Volatility index (VIX). The VIX is a measure of expected price fluctuations in the S&P 500 Index options over the next 30 days. It provides a measure of market risk and investors sentiment; some refer to it as a fear index.  As seen in the chart below, the VIX has had several spikes in volatility over the last few years.

Even though the stock market has had periodic bouts of volatility over the last three years, the S&P 500 was still up over 44% during this period1, despite the volatility.                                                                                                                              

Another measure of volatility is the number of days of a plus/minus 1% change in the S&P 500.   In 2019, there have been 32 days of plus or minus 1% moves, with 13 coming in the last month alone. Putting that in perspective, the average move of more than 1% has been 66 days per year for the last 19 years (see the chart below).

Further, the chart reflects only one year in the last seven that has been above the 19-year average. This shows that while volatility has picked up recently, this isn’t out of the historical norm and, in fact, has been less volatile compared to other periods. 

There are several reasons why market volatility has picked up in the recent months, including

• Global economic data been slowing
• Global interest rates have been compressing
• Increased trade tension between the US and China

The reasons for volatility are real, but the one constant of the market is there are always issues to worry about whether it is the economy, Federal Reserve policies, elections, oil prices or the health of the consumer.

While volatility certainly brings anxiety, it is not necessarily always a negative occurrence. Volatility can be positive and refer to times when stocks are moving up quickly. Most investors are more concerned with downside volatility but even that can create long term opportunity for investors who are prepared to take advantage of these situations through dollar cost averaging.

 As we stated prior, volatility is common in the markets, and timing these instances is extremely difficult.  For investors interested in reducing overall volatility for their investments, we have recently launched the “Gradient Buffered Index Portfolio”.  This portfolio offers a pre-determined level of downside protection, allows investors to participate in market upside (to a cap level) and has a short-term maturity. If you have interest in this type of strategy, please feel free to reach out to Gradient Investments for more information. 

1Morningstar, Inc

Advisory Services offered through Cooper Financial Investments, LLC. Insurance services offered through Cooper Financial Group, LLC, an affiliated company. Cooper Financial Investments, LLC and Cooper Financial Group, LLC are not affiliated with or endorsed by the Social Security Administration or any government agency, and are not engaged in the practice of law. All written content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. The information contained herein is not an offer to sell or a solicitation of an offer to buy the securities, products or services mentioned, and no offers or sales will be made in jurisdictions in which the offer or sale of these securities, products or services is not qualified or otherwise exempt from regulation. The information contained in this material have been derived from sources believed to be reliable, but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed.

Whenever you invest, you are at risk of loss of principal as the market does fluctuate. Past performance is not indicative of future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital. Cooper FInancial Investments, LLC is not affiliated with Gradient Investments, LLC.