Volatility is back in the market

Volatility is back in the market, after several years of below-average volatility.

The current volatility is above average and is a reminder of what equity markets are more commonly like.

The current stormy weather is threatening to get worse before it gets better.

As discussed in this previous post, research suggests that "investors make most mistakes after down turns," which is akin to jumping off a ship in the middle of a hurricane. With a full-force correction (a market retreat of 10% or more from the previous high -- the third this year) in force, many investors are jumping ship or preparing to do so if the plummet continues.

We wrote two months ago that "all the loudspeakers of the giant financial retail firms and the financial news media are constantly blaring a message that you have to time cycles -- cycles of the dollar, cycles of the Fed, cycles of quarterly economic acceleration or deceleration."

If, however, you base your strategy not on timing cycles but on the real source of most of the great wealth created for families in this country for the past hundred years, the ownership of shares in successful businesses for a period of years or even decades, then you should both expect interim volatility and be prepared to weather it.

Unlike most of what you hear, we advise that you realize that there will always be ebbs and flows in the mighty financial ocean, but that these by themselves don't make you change your mind about businesses with solid prospects that you intended to own for many years.

You can read more on this subject in our most recent market commentary, which is posted in the commentary section of the Taylor Frigon Capital Management website.