RVW Wealth Advisory: Market Volatility in Perspective


“In the short run, the market is a voting machine but in the long run it is a weighing machine.”

-Warren Buffett, May 1987

Buffett was quoting the legendary Benjamin Graham, the father of value investing, who referred to a fictional “Mr. Market,” a “poor fellow [who] has incurable emotional problems.”  Mr. Market is a reminder of how the stock market is a fickle personality who exhibits major mood swings, both good and bad.  It’s important to keep this in perspective, especially during times such as these.

As always, the best way to deal with such volatility is to look at long-term behavior.  The results are not just positive; they unequivocally show that stocks markets have always recovered.

While equity markets perform well the during vast majority of years, within a year, sharp downturns are common.  Below, we show how the S&P 500 index has performed within each calendar year over a 42-year period.  The blue bars represent the total return of the index during each individual year while the orange bars represent the largest intra-year decline.  Blue bars above the line indicated that the index finished in positive territory.

As you can see, the positive blue bars dominate the chart despite the presence of many years of particularly difficult downturns.  In fact, during the time period shown (1980 through 2021), while the average intra-year decline was 14%, the S&P 500 index level increased from 108 to 4,766, an increase of 4,300%.

Volatility is not the same phenomenon as risk.  While there have been many drops in the market recently, this volatility is the price equity investors have paid for extraordinary long-term returns.

If you wish to discuss any aspect of your portfolio or the current markets, please call us, send us an email, or schedule a video meeting.  We look forward to speaking with you.


Your RVW Wealth Team