'Like a Rollercoaster': Stocks Haven't Been This Volatile Since 2008

If you’ve been feeling like the stock market is especially bumpy this year, you’re right.

One way to measure that bumpiness, aka volatility, is how often the stock market has moved more than 1%, in either direction, within a single day.

In a new blog post, LPL Financial Portfolio Strategist George Smith points out that the frequency of intraday swings of 1% or more for the S&P 500 has been “extremely elevated” in 2022. More than 87% of trading days so far in 2022 have experienced swings that big.

The last time the market had intraday volatility this often, it was in 2008 — in the midst of the Great Recession and a global financial crisis.

You can thank persistently high inflation and the Federal Reserve's response to it for some of the movement in 2022. The Fed has raised its benchmark interest rate several times already this year in an effort to tamp down on inflation. As the central bank continued to raise rates and consumer prices continued to rise, investors began to get more jittery and increasingly worry about the looming threat of a recession.

“The stock markets this year have felt like a rollercoaster so it’s no surprise that the data shows it has been one of the toughest and most volatile on record,” LPL's Smith said.

He also points out that the S&P 500 has closed in the green on just 44.6% of days this year — the lowest portion of positive days since 2002.

How should investors react to stock volatility?

When the stock market is volatile, it’s easy to get discouraged and perhaps feel tempted to take action. This is especially the case since many experts don’t expect the stock market to calm down any time soon.

“We expect renewed market volatility ahead,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a recent research note, after warning investors not to chase the recent short-term rally. Making things even tougher for investors is the fact that 2021 was a relatively calm year for stocks.

But remember: some level of volatility is normal.

A good financial advisor will caution against making significant changes to your portfolio when things get rocky. It’s difficult, but sticking with your investing plan and keeping your money in the market is generally the best way to come out on top in the long run.

If you feel like you must do something, there are a few low-risk investing moves that could make sense for a volatile market. Instead of doing anything drastic that could come back to haunt you, consider rebalancing your investments or implementing a dollar-cost averaging strategy.

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