Tackle Today: Volatility Giveth and Taketh
January 31, 2023
«But you never hear about the giving»
Traders,
The average annual return for the S&P 500 has hovered around 10%. Let’s call that the trendline return. Ironically, it rarely hits that number on the nose in the calendar year. Instead, volatility creates both above-average returns and below-average returns.
But you never hear about it when the market goes up more than average, do you? It’s only when stocks get rocked and we see a down year, that the news media will bellow about the evils of volatility.
To wit: Here’s what the S&P 500 did over the past four calendar years, including dividends:
2019: +31.21%
2020: +18.02%
2021: +28.47%
2022: -18.01%
Three years of way above-average returns followed by one year of well below-average returns. Those who curse volatility in down years fail to realize it’s also what drives the outsized gains in significant up years.
Intelligent investors realize that volatility is a good thing. It’s the engine driving equity returns so high.
Trading for Beginners: Gino’s Gems
Check out yesterday’s Gino Gems!
Chart of the Day: Gold Miners (GDX)
A bull retracement beckons in gold miners. The first four-day pullback of the near year is upon us.
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