Why is there a piece every day in print or digital media bemoaning the lack of volatility in the stock market? After 15 years of volatile markets, why is it an issue that stocks aren’t volatile for a very short period? Is that really so bad?
Stocks and bonds have always gone up and down every day; that’s how those markets work. But since the late 1990s the markets have been more volatile than they had been historically. Would mean reversion be so bad in this instance?
The other part of those articles that frustrates me is that the writers usually equate lack of volatility with complacency and a stock market bubble. Stock market bubbles, and bubbles more generally, are not connected with complacency, they are connected with euphoria and desperation to take part.
Anybody talking with real investors every day knows that those feelings are not around this time. I speak or email with clients every single day who are concerned about the stock market. I was around in 2000, that is not how it was then.
We had 15 years (1984-1999) where everything went right and people were afraid to miss out. The last 15 years (2000-2014) we have had so much wrong that people are afraid to take part.
There is an old saying that bull markets climb a wall of worry. From my perspective, there is a lot more worry than euphoria and desperation to take part.
Will stocks eventually go down some? Of course. Again, that is how those markets work. But the few investors who were brave enough to stay fully invested and diversified in the stock and bond markets over those entire 30 years have made an enormous amount of money and that is the lesson the markets teach us.