Investors shouldn’t expect a smooth ride when they put money in the stock market.
Unforeseen sources of uncertainty emerge frequently, introducing periods of volatility as the market prices in information in bits and pieces.
The Omicron variant is a perfect example of this. News of its emergence triggered a massive selloff in the stock market despite next-to-no understanding of what it could mean for the economy.
However, it’s worth noting that these bouts of volatility aren’t just about sharp selloffs. They also come with massive rallies.
Two cool charts hit my inbox in the past few days that I thought captured market volatility over short and long periods of time.
Chart 1: Good days often follow bad days