Let's Talk: Increased Volitility

Are you prepared for the increased volatility of the next decade. During my career 1984-1999 the market enjoyed an unprecedented rise. Despite the volatility of the single largest one-day decline in the history of the market and two other volatile years the sixteen year bull market was extraordinary. In 1995, I stated that the following decade would be substantially more volatile that the 80’s and 90’s.

The decade from 2000 has proved to be one of the most volatile in history. An investor in the S&P 500 on January 1, 2000 has yet to break even. I am stating here that the next two decades will be even more volatile than this one. The reasons are globalization, communication, and technology.

Globalization will increase the breadth and depth of the markets. This is good and bad. At times the different markets are trading in contrast to each other and diversification can reduce risk and increase opportunity. But in times of crisis they trade in tandem leaving no safe haven and increasing the risk and volatility.

Communications will allow information to speed around the globe and technology will allow for faster response. This would seem to be good, but it requires a quicker response to changes. When decisions are forced without adequate thought, there is an over reaction that increased volatility.

Are you prepared for this increased volatility?