Market Volatility

A dramatic shift in US tariff policy announced on April 2, coupled with ongoing global reactions, has left investors uneasy.

The discomfort investors may feel amid current volatility stems from markets adjusting prices to ensure expected returns remain positive.

Although sharp declines in stock prices can be unsettling, history shows markets recover from downturns.

The US tariff policy shift announced on April 2, along with worldwide responses, has rattled investors. The VIX index, a measure of market volatility, has surged to its highest levels in nearly five years. Yet, in times of genuine economic uncertainty and rapidly evolving information, this volatility signals that markets are doing their job—processing change in real time.

Sudden market drops and heightened volatility can be jarring, as can swiftly changing economic policies. Markets are designed to handle uncertainty, constantly absorbing new data and adjusting expectations about how developments like trade policy shifts might affect the global economy. They do this proactively, setting prices so that future returns are expected to be positive.

Beyond market performance, economic policies like those tied to international trade ripple through the broader economy. While markets price in these effects almost instantly, the real-world economic consequences unfold more gradually. This timing gap highlights a key distinction: as investors, we may face short-term unease, but as participants in the real economy, the impact plays out over time. Even if economic challenges persist, your investment outlook needn’t be bleak—markets have already baked in the known factors.

The unease you might feel today reflects markets recalibrating to maintain positive expected returns. As shown in Exhibit 1, historical data reveals that market returns after significant declines have generally been positive. Looking at US equity performance following drops of 10%, 20%, or 30%, average cumulative returns over one, three, and five years remain in the black. Over five years, annualized returns post-decline align closely with the US market’s long-term average of roughly 10%.

When your portfolio takes a sudden hit, the best course of action is often to stay the course and focus on the potential for brighter days ahead.

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 Rigden Capital Strategies is a fee-only fiduciary firm dedicated to providing personalized wealth management and financial planning services. We take a client-first approach, ensuring that every strategy we develop is tailored to individual financial goals, risk tolerance, and life circumstances. Our comprehensive services include investment management, retirement planning, tax-efficient strategies, and estate planning guidance. By integrating active and passive investment approaches, we help clients build resilient portfolios designed to weather market cycles while optimizing long-term growth. With a commitment to transparency and ongoing collaboration, we strive to be a trusted financial partner, helping clients navigate complex financial decisions with confidence and clarity.

Disclosure: This content is for informational and educational purposes only and should not be interpreted as financial, legal, or tax advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information provided. Investment decisions should be based on individual circumstances, and we recommend consulting a qualified professional before implementing any financial, legal, or tax strategies. Past performance is not indicative of future results, and all investments carry risks, including potential loss of principal.