Why are Markets Volatile?

Markets have been very volatile lately.

What’s going on?

Let’s take a quick look at the factors that are influencing markets right now.

(Not interested in discussing markets? Scroll down to my P.S. for something fun.)

1. The bull market narrative has shifted

For months, investors have told a “Goldilocks” story of a strong economy, tamed inflation, and interest rates that were soon to drop.

However, stronger-than-expected economic data and sticky inflation have now complicated the story, and investors have become wary. 1

There are still plenty of reasons to be optimistic, but investors are being careful and taking in earnings data to gauge the upside potential of the next weeks and months.

2. Interest rates are likely to stay higher longer than we expected (or wanted)

A strong economy and hot inflation mean the Fed is now getting cold feet about cutting interest rates. 2

Recent comments by Fed chair Jerome Powell suggest the Fed will keep rates high until economists are confident inflation is fully in reverse.

Some analysts are even pricing in the odds of another rate hike if inflation continues to remain high. 3

Since investors have been banking on rate cuts coming soon, the new “higher for longer” reality is causing them to reevaluate their positions, further stoking volatility.

3. Geopolitical flare-ups are causing tensions to rise

With Israel and Iran trading attacks and a spring offensive gearing up in Ukraine, there are plenty of geopolitical worries, sadly.

Some good news (if there is any good news when so many lives are at stake) is that geopolitical shocks typically only have a temporary impact on markets. 4

We don’t know what lies ahead, but we hope and pray for a peaceful end to the violence.

Volatility is normal after a prolonged rally

Here’s the bottom line: volatility after a strong rally is very common.

Especially at the beginning of a new quarter when investors are digesting earnings reports from the previous quarter and reassessing company performance.

My crystal ball is in the shop, so I can’t tell you with certainty what happens next.

However, given that the U.S. economy remains healthy, with a strong jobs market and robust consumer spending, my team and I don’t see a major risk of a correction turning into a serious downturn. 5

It’s normal to be nervous when markets feel uncertain.

If you’re not sure how you’re portfolio (and retirement) can weather volatility, let’s talk.



P.S. Want a break from the headlines? Check out the live animal cams from the San Diego Zoo and the National Zoo. Which one is your favorite?

1. https://www.fanniemae.com/newsroom/fannie-mae-news/hot-economy-inflation-likely-keep-rates-higher-longer
2. https://apnews.com/article/inflation-interest-rates-federal-reserve-powell-cuts-c60436c5e719ce95fc487fdb98395d09
3. https://www.ft.com/content/8c5da64b-766e-4993-86f5-aac95342432a
4. https://www.morningstar.com/news/marketwatch/20240422136/history-says-stock-market-dips-caused-by-geopolitical-turmoil-should-be-bought-not-sold
5. https://www.usnews.com/news/economy/articles/2024-04-22/gdp-inflation-highlight-week-of-economic-data


“Volatility is often a symptom of risk but is not a risk in and of itself. Volatility obscures the future but does not necessarily determine the future.”

– Peter Bernstein
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only. The S&P 500 is an unmanaged composite index considered to be representative of the U.S. stock market in general. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. For illustrative purposes only. Wealth With No Regrets ® is an investment advisor in Georgia. Wealth With No Regrets ® is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Wealth With No Regrets® only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Wealth With No Regrets’® current written disclosure brochure filed with the SEC which discusses, among other things, Wealth With No Regrets’® business practices, services, and fees is available through the SEC’s website at: www.adviserinfo.sec.gov These materials are for informational purposes only. It is not intended to provide, and should not be relied on for, any tax or legal advice. Please consult a qualified professional before making decisions about your financial situation. Any reduction in taxes would depend on your specific tax situation. Investments in securities entails risk and are not suitable for all investors. This is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. It is important that you do not use email to request, authorize or effect the purchase or sale of any security, to send fund transfer instructions, or to effect any other transactions. Any such request, orders, or instructions that you send will not be accepted and will not be processed. Content prepared by Snappy Kraken.

Leave a Comment