Staying Invested

Perron Team
Jun 17
2 min read

Market volatility can trigger panic for some investors, particularly when news headlines tend to focus on stock prices crashing and fears of broader economic downturns. Experiencing an emotional response to market volatility is not unusual. It can be nerve-wracking when you begin to see your investments account balance decrease, even if only temporarily, due to a downturn in the market.

At the beginning of 2024, many investors were cautiously optimistic that the change in U.S. leadership would help propel growth in the economy. However, the sense of optimism quickly faded in April when policies regarding trade were announced and the market reacted swiftly and negatively. On April 2nd we saw panic play out when the market (S&P500) fell over 12% following the Liberation Day announcements to a low on April 8th. Following the April 8th sell-off stocks recovered over 18% to May 30th, 2025.

Figure 1: S&P500 April 1, 2025 – May 30, 2025

A common gauge of market uncertainty is the CBOE Volatility Index (VIX), which measures 30 day expected volatility of the U.S. stock market. As shown in the second figure the VIX spiked sharply on April 8th, the same day the S&P500 hit its lowest point over the time period of April 1, 2025 - May 30, 2025. The directionally inverse relationship of falling stock prices and increasing expected market volatility between the VIX and the S&P500 is visible in Figure 1 and Figure 2.

Figure 2: VIX Index April 1, 2025 -May 30, 2025

Remaining calm and staying invested in times of volatility can be difficult. However it can pay off, for example if you remained invested from April 1st to May 30th the S&P500 increased ~4%. Not too bad considering all of the negative news in April!

Figure 3: S&P500 Increase from April 1,2025 to May 30, 2025

On the other hand if you had panicked and sold for example on April 4th and bought back in on May 30th when the negative news had subsided, you would have missed the over 16% recovery during that time.

Figure 4: Selling Early (April 4, 2025 – May 30th 2025) S&P500

History shows that there is no perfect time to invest and timing the markets is nearly impossible. The chart below demonstrates how missing the best days can hinder returns in the long run. For example missing the best 20 days over the 20 year period in the chart results in a 3.5% return compared to a 10.4% return when remaining fully invested. There is an old saying that still rings true today “time in the market beats timing the market". Market downturns, corrections, and even recessions are inevitable parts of the investing cycle, when they do occur remind yourself of your long-term goals and take into consideration that it may be best to ignore the headlines and stay invested.

If you have questions or concerns about market volatility don’t hesitate to reach out to your team at CPWM to discuss the impacts of market volatility on your investment goals.

Figure 5: Performance of a $10,000 investment in the S&P500 over 20 years (Jan 3, 2005 - Dec.31, 2024)