With a stark shift in US tariff policy announced on April 2 and ongoing responses worldwide, many investors are on edge. Volatility as measured by the VIX index has spiked to levels not seen in nearly five years. But when there is real economic uncertainty and information is quickly changing, volatility is a sign that markets are functioning. 

Investing, like a roller coaster, has its ups and downs. One minute you’re climbing higher and the next a sudden decline makes your stomach drop. A few reminders can help investors to relax amid the turbulence. 

On Monday, January 27, NVIDIA dropped nearly $600 billion in market value upon news of a relatively cheap, open-source AI model from China. 

Financial markets showed resilience in 2024, extending the bull market that began in late 2022 as stocks weathered interest-rate changes, uncertainty around the US elections, and the ups and downs of the Magnificent 7 stocks. The S&P 500 posted a gain of more than 20% after falling short of that mark a year earlier, when it rose 19%. While there were some notable downturns through the year, they were followed by quick recoveries. 

Against a backdrop of geopolitical tensions, economic challenges, and electoral uncertainty, 2024 proved the resilience of public financial markets and the power of human ingenuity once again. Markets continued to do what they do best: efficiently process information and set fair prices, rewarding long-term investors with positive returns. 

 

Ask investors what kind of return they expect out of stocks in any given year, and many will respond with the market's historical average return.  

The US stock market has been on a winning streak, so some investors may have been jolted when the S&P 500 fell more than 6% from July 31 to August 5. 

It’s natural for investors to look for a connection between who resides in 10 Downing Street and which way stocks will go. 

You might be inclined to select investments based on past returns, expecting top-ranked funds to continue delivering the best performance