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Stock Market COVID-19 Volatility

Stock Market COVID-19 Volatility

June 30, 2020

Stock market volatility as measured by the S&P 500 demonstrates the fears and uncertainty of these troubled times, writes Peter Watson.

Welcome to the roller coaster world of investing. The stock market volatility has been extreme and set new records.

The emotional stress on some investors can be significant. Many will have bailed on their long-term strategy of buy-and-hold and panic driven decisions can often be harmful.

According to CNBC, as of June 3, as recently as February the S&P 500 US stock index was continuing to increase in value at a steady pace. This marked the longest rising bull market in the history of the S&P 500.

In March, the COVID-19 fears escalated and in just one month the bottom fell out of the stock market. Investors panicked, often the case with extreme market declines.

Then suddenly the stock market values increased quickly. As of June 3, the most recent 50 days of trading activity for the S&P 500 set a record gain of 37 per cent. The largest gain of that US stock index since 1957.

The S&P 500 was just 9 per cent below its all-time high level reached in February.

Unanticipated stock market volatility is normal. Periodically, during times of uncertainty and fear, stock market volatility can escalate.

For most investors, owning stocks is most suitable when you have a long-term time horizon.

Turbulent times require the discipline to ignore normal short-term sudden declines in value and stick with your original plan to stay invested.

Investing for the long term, then changing your mind because of short-term events can be harmful to your investment portfolio.

Peter Watson is registered with Aligned Capital Partners Inc. (ACPI) to provide investment advice. Investment products are provided by ACPI. ACPI is a member of the Investment Industry Regulatory Organization of Canada. The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Watson Investments.