Market Commentary

Volatility

gross domestic product

The day of mourning for President Bush put a stop to the market midweek and may have contributed to the extra hard day on Tuesday as stocks fell sharply. However, it is also a reflection of the stark increase in volatility in the market since October 1st.

Volatility itself is not a bad thing because you can have up volatility as well as down. Most pundits only talk about it when it is down and when it is up they just refer to a bull market move. Volatility today is a reflection of uncertainty regarding the rising Fed funds rate and trade disputes. However, I might suggest some of it is also over a concern by the market of economic weakness in most of the world outside of the U.S.

For investors it is never wise to react to volatility. It is smart to react to changes in the economy, or to an improper balance in a portfolio, and to over or underinvestment in certain sectors, but never to the swings in stock prices over all.

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