Make Volatility your friend

War, Inflation, oil prices, elections & pandemic make a potent cocktail. Switch on any TV channel or open any newspaper, whey even twitter is filled with panic messages.


Will Russia attack Ukraine? What will happen to oil prices if it were to take place?

How could the US Fed have gone so wrong about inflation?? Inflation is at 7.25%, making it a 40 year high, while real policy rate is at -7.25-7.5%!!

Who will win the state elections in India, esp UP?

If this wasn't enough, there is this new variant in Omicron!!


This past Monday, the markets had the highest fall with Sensex falling 1750 points. The following day, saw a huge move up by similar points.

Both the huge downswing and upswings were caused by news out of Russia - Ukraine tensions.

Such big moves on either sides can be quite unnerving for investors. So what does history teach us?

This chart beautifully tracks the drawdowns and recovery times.

What are the key messages?

1. Markets have had many shocks in the 8 decades that this study covers.

2. The S&P 500 fell 5% on average in 20 major geopolitical events dating back to the Pearl Harbor attack in 1941!

3. However, the S&P 500 recovered those losses in fewer than 50 calendar days on average.


What should you do?

Stick to your Asset Allocation and if stock markets were to panic and fall...reallocate to Equity.

After all the sale won't last for long!!


Source: LPLresearch, Mint.


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