So this is what all those market watchers meant when they said the stock market was quiet, too quiet.
The violent moves for stocks last week have been particularly jarring for investors because they’d been sailing through unusually calm trading and strong returns for more than a year. It was a return to more “normal” conditions – but much like stepping out of a soothing, warm shower on a cold winter morning.
Experts are saying even more volatility may be on the way. The market is worried about the threat of higher inflation and interest rates, and it’s also concerned that stock prices have become too expensive following their huge run. Many still expect stocks to gain over time, in part because the global economy is strengthening and recently passed tax cuts should give an extra boost to corporate profits. But a drop for stocks in the near-term may well be a restorative thing.
“This pullback is simply helping to get some of the froth out of the market,” said Tim Armour, chairman and CEO of Capital Group, which runs some of the world’s largest mutual funds under the American Funds name. “Some volatility is a natural part of investing, and it is healthy for markets.”
The nearly 8 percent drop for S&P 500 index funds from in only 10 days was the first loss of even 5 percent in a year and a half, a record amount of time. For younger investors, this may be their first bout with market volatility.