2-minute read
Knock knock, it’s me again: VOLATILITY.
Why do you finance dorks call it volatility when the market is tanking? Just call it what it is.
I know, you’re right. Stock investors are losing money, and losing it fast.
It seemed to have happened in a blur.
You’re not wrong. In 20 trading days from February 19 through March 11 the S&P 500 dropped 10%. A 10-20% fall in the market is termed a “correction” and it was the 5th fastest correction in the last 75 years.[1]
So, is this just due to tariffs?
You’d be hard pressed to say the tariffs, and their unpredictable implementation, aren’t playing a role. It’s been said the market hates uncertainty. For better or worse we’re experiencing that in our trade policy.
And who knows when we’ll get clarity on that.
It’s anyone’s guess. However, let’s put this into perspective.
How’re you going to put this into perspective?! The most recent pre-Trump tariffs happened during the Great Depression!
Let’s just set tariffs aside for a minute and discuss corrections. Since 1928 there have been 37 corrections in the S&P 500. That means we witness a 10-20% decline every 2.6 years on average.[2]
It sure doesn’t seem like that.
It probably doesn’t to most people. Especially coming off the heels of 2023 and 2024 where we saw the market rise 26% and 25%, respectively.
Every crap market seems different to me, though.
You’re absolutely right on that. However, the similarities between this one and the 2018 correction are interesting. If you ask ChatGPT, “Why did the stock market fall during the end of 2018?”, it provides the following reasons: (1) Federal Reserve Rate Hikes, (2) Trade War Uncertainty, (3) Economic Growth Concerns, (4) Government Shutdown, and (5) Market Liquidity Issues. Sound familiar?
To be honest, I barely recall any of that.
Another thing to consider about our current market: it’s not all bad. Here’s the year-to-date return of different types of stocks:[3]
Interesting. Certainly not something that the news would parse out.
And if you’re fixed income owner, here’s what you’re getting:[4]
So we’re not in full freak out mode yet, but could we get there? Could we see the market fall 20% this year? 30%?
Let’s see what history has shown us about market crashes:
Year | S&P 500 Total Return | Reason |
1931 | -44% | Great Depression |
2008 | -37% | Great Financial Crisis |
1937 | -35% | Great Depression |
1974 | -26% | OPEC Oil Embargo/Inflation Spike |
1930 | -25% | Great Depression |
2002 | -22% | Dot-com Bubble |
Anytime you can bring up the Great Depression you gotta do it…
Look, these are all the calendar years dating back to 1928 that saw the market fall by 20% or more. All but one of these instances corresponds with a recession.
Is this supposed to make me feel better?
The risk of a recession is on the table. However, the unemployment rate is 4.1%, inflation is below 3%, and Q4 2024 GDP was 2.3%. The situation can change but this doesn’t exactly scream recession.[5]
And if that doesn't make me feel any better?
It’s impossible to entirely block out the noise these days but try to muffle it. Talk to someone you trust, find a healthy distraction, or perhaps, reassess the risk in your portfolio. Remember what helped you in the past and run the same play.[6]
[1] Source: https://fsinsight.com/macro-strategy/first-word/2025/03/12/the-20-day-10-correction-in-sp-500-is-5th-fastest-in-past-75-years-5-prior/
[3] Returns track the total return of ACWX, VTV, IWM, and VUG from January 1 – March 19, 2025.
[4] Returns track the total return of VMRXX, IEF, and VGLT from January 1 – March 19, 2025.
[5] Economic data provided by the Bureau of Labor Statistics and the Bureau of Economic Analysis.
[6] The information offered is provided to you for informational purposes only. The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.