Making Sense Of Market Volatility

Much like the infographic to the left, showing what success looks like, long term investing doesn't always go in a straight line and increases over time, albeit it can feel like a roller coaster ride much like the feelings many of us are going through today with COVID-19.  The "roller coaster" investment feelings that we are experiencing are from extreme market volatility where the price of a stock or bond goes up and down based on supply and demand from investors. Volatility measures how much a security moves, and these moves have been significant lately. There are many ways to measure and define success, and we know for certain it takes discipline, perseverance, having concrete goals, and sticking to a plan to achieve success: much like it does for successful investment outcomes.  

Why is this happening now?

Extremely market volatility occurs when something unexpected happens ie COVID 19  (aka Black Swan event), and it's impact creates uncertainty in the markets which leads to extreme price movements you are probably hearing about constantly in the news cycle. Though it can be nerve-wracking for investors, volatility is actually a normal part of investing and has both positives and negatives. On one hand, extreme market volatility like we are experiencing right now can lead investors to make short term investment decisions that are out of sync with their long term investment goals,  On the other hand, volatility can create potential opportunities for well seasoned investment professionals and strategies; many of which are taking care of your hard earning savings and investment dollars.

How should I respond?

Extreme market volatility and market downturns are inevitable (it has been 11 years since our last significant drop so we tend to forget), but markets have bounced back from past crisis in the past.  See infographic below. 

Remember you're invested for the long term: resist the temptation to invest on how you are feeling in the moment and focus on your long term goals. Stay the course:  try avoid making any immediate investment decisions that aren't already part of your financial plans.

What were the market developments last week?

  • Canadian and U.S. markets moved steadily higher throughout the week, perhaps demonstrating investor confidence that the recovery from the COVID-19 outbreak could be swift.

  • The Canadian economy lost 1.01 million jobs in March, while the U.S. announced weekly jobless claims of 6.6 million. The U.S. Federal Reserve announced an additional $2.3 trillion in aid, timed to coincide with the release of the jobs number.

  • Saudi Arabia and Russia were expected to agree to cut oil output after American oil production began falling. Regardless, the price of oil continued to decline, as many expected these measures would not make enough of a den