LIVE MARKETS-Expect volatility, and adjust accordingly

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EXPECT VOLATILITY, AND ADJUST ACCORDINGLY

Market volatility is as certain as death, taxes and incorrect weather forecasts, according to a recent note from Austin Pickle, investment strategy analyst at the Wells Fargo Investment Institute, and can often prompt strong emotional responses.

Periods of drawdowns can fan fears of further losses and lead to anxiety, inaction or imprudent action that could damage financial goals, while rallies can induce feelings of invincibility and lead to excessive risk-taking.

In order to steer through bouts of volatility, WFII says the key is to "understand that it is normal and reframe it as an opportunity."

Pickle notes the frequency of a decline in the S&P 500 .SPX of 5% or more happens 3 to 4 times per year on average, a drop of 10% or more happens about once per year, and a fall of 15% or more happens once every two years. A tumble of 20% or more, commonly known as a bear market, happens every three years.

Of these, the last 5% fall, at the low, happened in August, the 10% drop was in October 2023, the 15% decline was in October 2022, which also marked the 20% fall.

Pickle said this downside volatility is to be expected and as such it may help to view these instances as "periodic clearance sales on a portfolio shopping list." As for rallies, Pickle said investors can use those as a chance to "offload undesirable assets or trim areas where the portfolio is overallocated at elevated prices."

WFII said they currently prefer U.S. over international equities and hold a favorable rating on U.S. large caps and an unfavorable on emerging market equities.

(Chuck Mikolajczak)

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