What Is Causing Market Volatility?

The market was going so well, is this a market correction?  What happened?

Talking about market volatility is never easy.  It's always a challenge when the stock market makes you feel like you're on Mr. Toad's Wild Ride, when you're certain you chose the line for "It's a Small World".  So, what happened to cause market volatility?  What are the signs of a market correction?

The following article on recent market volatility was posted on Linkedin on January 25, 2022 and written by Burt White, Managing Director, Chief Investment Officer at LPL Financial.  I felt his explanation of what happened to cause market volatility was so well written that I would share it with you.  Please read to the end where he provides sage advice for all of us.

As always, reach out if you have any questions or if I can be of service to you.

Burt White, Managing Director, Chief Investment Officer, LPL Financial  January 25, 2022

"Markets were very volatile today and have declined in 10 of the previous 14 sessions of 2022.  While we expect more volatility through this mid-term-election, Fed-rate-rising year, there is also some good news to take from today.  

There's some good news...

First, the reason for the recent bout of volatility is largely not pandemic related.  This is huge news as for the last 2 years, COVID has been the only dog that has wagged the market volatility’s tail. The recent concerns are around inflation, supply chains not meeting increased demand, and a hawkish Fed – all of which are by-products of a solid economy and recovery.  While volatility isn't fun, the reasons for its emergence matter and the recent volatility culprits are pretty positive.

Second, markets rallied strongly today off its lows to finish virtually flat. Buyers entered as markets were, and still are, deeply oversold. Doesn’t mean that the market won’t go lower, but we are closer to the discovery making process of the bottom. Also a plus, broad markets have avoided correction territory so far.

Third, technical support held. The market’s near 4% decline went thru, settled, and then rallied above the October 2021 lows (around 4300 for the S&P) and settled just below the 200 dma. There are still tons of technical breakage everywhere.  But today’s market action was a step in the right direction.

My best advice...

Stay focused on your plan out there. Market volatility will likely remain elevated but the best plans remain to stay focused, stay patient, and stay calm."

Thanks, Burt!

About the author 

Therese Nicklas

Therese Nicklas is a CERTIFIED FINANCIAL PLANNER™, Certified Money Coach(CMC)®, and Certified Success Principles™ Coach. She specializes in helping executive women who are at a crossroads and feel uncertain about their next steps. By empowering them with smart money strategies, they learn how to build their new big, bold life with certainty, clarity, and confidence. She is passionate about inspiring women to design a fulfilled, intentional life. “True wealth – true financial freedom – is being free to focus on the things that matter most to you – what money can’t buy.” Her motto – “live your life by design and not by default”.

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