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Make Me Smart with Kai and Molly

Expect more volatility. But don’t let it freak you out

Gigi Douban Aug 28, 2015
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This week in the markets is brought to you by the letter V. That’s V for VIX, V for violent swings in the market…

V … for Volatility.

Now, you may be hoping we’ll get a break from volatility after this turbulent week. Well, traders say, fuhgeddaboutit: the way things are in our new economic reality, we’re likely to be hearing a lot more of the V word in coming weeks.

After all, they say, volatility is a normal part of any market. So It’s hard to predict. But John Sweeney, executive vice president of retirement and investing strategies at Fidelity, has a theory.

“Volatility will be probably more prevalent than it has been over the last couple of years,” he says.

That’s because, he says, we’re in the sixth year of a bull run. Prices have steadily gone up. So the market would be more volatile even without this week’s swings.

Then question is, how long can we expect this to go on?

“That’s unclear,” Sweeney says.

Yeah, he doesn’t have a crystal ball either. He says between the economic slowdown in China, the price of oil, and the Fed’s plan to raise interest rates, there’s still a lot of uncertainty.

But more volatility isn’t always a bad thing, according to Jamie Cox, managing partner at Harris Financial Group.

“If you have a low volatility environment, you can basically just buy stocks indiscriminately,” Cox says.

And buying on impulse without doing your homework is usually bad news for investors in the long term, he says.

So instead of fearing volatility, maybe we should embrace it.

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