Our thoughts on recent market events
Volatility certainly came back in force.
As an investor, you should expect more bumps in the road than you’ve seen the last few years. That’s not necessarily a bad thing.
But it’s important to understand that even though market volatility is picking up, there are still strong fundamentals in the overall economy.
- In the U.S., this bout of volatility happened when about 80% of the S&P 500 companies who recently reported earnings beat their estimates.
- The global economy is equally positive, with growing industrial production, accommodative financial conditions, and strong global demand.
What this means for investments
The uptick in volatility doesn’t change our commitment to you at Principal. But as an investor, you should expect a rougher road than the one you’ve traveled the past two years.
Here’s our current thoughts:
- Volatility may bring opportunity. (If the markets dip, you can potentially buy more with your money.)
- The current retreat is not likely the beginning of a bear market, but a necessary correction after a period of unprecedented calm.
- As inflation moves closer to the Fed’s target, monetary policy is likely to become less predictable…and returns more volatile.
- It may be beneficial to have broad diversification* in your portfolio as volatility returns.
* Diversification does not guarantee profit or protection from loss
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