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Mondial Chart of the Week: With great volatility comes great opportunity 📈


14 June 2020

Source: Bloomberg & Momentum Global Investment Management


What this chart shows


This week’s chart shows the proportion of trading days in each calendar year the US equity market moved in excess of +/- 3%. So far in 2020, the market has moved by such a degree almost 25% of the time, more frequently than in the financial crisis (2008, 17%), albeit with the caveat we are less than halfway through this year still (in absolute terms, 2008’s 42 days trumps 2020’s 25 days to date). After years of reduced volatility, helped not least by waves of stimulus from the Federal Reserve, 2020 has delivered a sharp reminder of the realities of equity market investing we had largely escaped in recent years.


Why this chart is relevant


During choppy episodes, it can be tempting for investors to review portfolio valuations more frequently than usual. Doing so might result in some divesting, in the hope they wait for calmer waters before returning to the market. 2020 has been a great example of the dangers of such behavior. With the US equity market has now erased all the first quarter’s losses to move into positive territory for the year, at the time of writing, those who did divest following the sharp down days have missed the sharp up days too. To paraphrase a classic movie quote – ‘with great volatility comes great opportunity’.


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