{"id":9842,"date":"2021-09-13T13:50:02","date_gmt":"2021-09-13T13:50:02","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9842"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"3-reasons-for-more-volatility-in-second-half-of-2021","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/3-reasons-for-more-volatility-in-second-half-of-2021\/","title":{"rendered":"3 Reasons for More Volatility in Second Half of 2021"},"content":{"rendered":"\n

Zacks Investment\nManagement provides insight into the biggest news stories and key factors that\nwe believe are currently impacting the market. This week we dive into 3 Reasons to Expect Downside Volatility in\nthe Second Half of 2021.<\/strong><\/p>\n\n\n\n

Reason #1: Downside\nVolatility is Normal, and It\u2019s Been a While<\/strong><\/p>\n\n\n\n

The S&P 500 has not pulled back -5% since October 2020,\nover which time it has continued to rally strongly. Even though downside volatility\nis very normal in equity investing, it\u2019s been a while since the S&P 500 has\nexhibited much of it. <\/p>\n\n\n\n

The last time the S&P 500 went this long without a -5% pullback\nwas during June 2016 to February 2018 stretch. Even when we look at an even\nlonger stretch of history, we find that the S&P 500 has gone a full year\nwithout a -5% pullback only three times in the last 50 years \u2013 twice in the 1990s\nand again in 2017.1<\/sup> Will 2021 be the third year with such a long\nstretch? <\/p>\n\n\n\n

Every investor wants to see the stock market trend nicely\nhigher with no downside volatility. But it\u2019s just not a realistic outcome. Data\nshows that since 1980, the S&P 500 has experienced an average intra-year\ncorrection of -14.3%2<\/sup>, underscoring how common and oftentimes steep\nmarket pullbacks typically are. The longer the S&P 500 goes without\nexhibiting more downside volatility, in our view, the more likely it becomes. <\/p>\n\n\n\n

Long stretches of rallies often cause investors to forget\nthat pullbacks are normal and natural, which increases the risk of making\nknee-jerk decisions when the stock market does eventually turn volatile.\nComplacent investors may see downside volatility as more worrisome than it is,\nwhich could lead to decision-making that runs counter to an investor\u2019s\nlong-term goals and <\/em>adversely impacts\nreturns. We would encourage investors to remain patient and stick to your\nlong-term plan. <\/p>\n\n\n\n

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How to Navigate Through the Market Despite \u00a0Volatility <\/a><\/strong><\/p>\n\n\n\n

Inflation,\na tight labor market, and supply chain issues are only a few examples of\nchallenges facing the current economic recovery. Through these challenges,\nstocks still soared in 2021 and the market experienced strong earnings, but\nwill that be the case for the rest of the year? <\/p>\n\n\n\n

To\nbetter navigate through market volatility, it\u2019s important to be prepared for\nboth the good and bad. In this report, we look at the earnings picture so far\nand EPS estimates for the quarters ahead. We also take a look at:<\/p>\n\n\n\n