Headlines have often been unsettling this year. Trade tensions, recession fears, inflation concerns and federal budget cuts have all contributed to market gyrations. Stock-market volatility spiked in late February and early March, and the S&P 500 dipped into correction territory.
This kind of turbulence can be worrying. Fortunately, a bit of perspective can help calm frazzled nerves.
Volatility Isn’t All Bad
Investors often associate volatility with losses, but that’s not the full picture. In reality, volatility measures how much asset prices fluctuate relative to an average—both up and down.
In fact, the stock market sometimes fares very well after periods of high volatility. Take March 2020, in the early days of the Covid pandemic. The VIX volatility index hit its all-time high on March 16 of that year. The S&P 500 started recovering four days later, then gained 144% through April 1, 2025.
Volatility means the markets are functioning properly. Tens of millions of trades happen daily, and asset prices continuously adjust to reflect new information. During times of great uncertainty, new information can change the outlook dramatically. Increased volatility during those periods is just the market doing what it does: pricing assets based on the information that’s available.
The constant recalibration of values creates opportunities for long-term investors. It may be heartening to remember volatility can, and does, work to your advantage as long as you keep investing.
A Word on Down Markets
The S&P 500 lost 4.6% in the first quarter. Between February 19 and mid-March, it fell more than 10% from its high, inching into correction territory.
It’s completely natural to feel uneasy when markets decline, but once again, perspective is key. Remember that no one can predict the future, which may look very different than the recent past. As CFA Rubin Miller put it in his newsletter, “The market is never ‘going down’—it only has gone down and may go down further.” Stocks may turn up six months from now or this afternoon.
Downturns are a routine part of market cycles. Naming these drops can be empowering—much like the tale of Rumpelstiltskin, in which a young woman gains power over a troublesome little man after discovering his name. To that end:
- A dip is a small, temporary drop in stock prices
- A correction is a decline of 10% to 20%
- A bear market is a loss of 20% or more
It also may help to understand that downturns are pretty frequent, and they don’t last forever. The S&P 500 has had 27 corrections since November 1974, including the one in March. Only six of those became bear markets.
What’s more, upturns tend to last a lot longer than downturns. There have been 18 bear markets in the S&P 500 since 1926, lasting a total of 177 months. By contrast, there have been 19 bull markets, and they have lasted nearly 1,000 total months.
And a correction does not necessarily mean a bad year. The broad Russell 3000 stock index had intra-year declines of at least 10% in 25 of the last 45 calendar years, according to research from Dimensional. In 17 of those 25 years, the index ended the year up.
Charting a Course in Stormy Seas
The market may have you feeling seasick about now. But through all the ups and downs over the years, stocks have stayed on a positive long-term trajectory. Your portfolio is designed to help you capitalize on the market’s long-term growth, with proper diversification and rebalancing to help manage the rough times. Only changes in your goals or circumstances should require adjustments to your plan—and we’ll be here to help you through that process when the time comes.
