Market volatility is about to make a comeback

THE last 15 years have been a magical time for the stock market – but don’t count on it lasting. While US stocks may indeed have the bright future markets currently predict, the cost of growth will be more volatility.

Since the 2007-2008 financial crisis, simply investing in the S&P 500 has offered great returns and fairly modest risk. Other than the odd bad months (especially around the pandemic), there have been long periods of smooth and steady gains.

Compared to previous 15-year periods, there have been much lower returns and similar, if not more, variability in most months. Annual realised volatility over the past six decades has had some very risky years, but it mostly fluctuated around a similar range and is about the same, on average, for each 15-year period.