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Our Thinking

Views on Volatility



Five J.P. Morgan experts share their thoughts on dealing with rocky markets


Key Takeaways



With interest rates rising and the economic cycle maturing, many investors are now experiencing higher volatility for the first time in years. We asked five J.P. Morgan experts, each with different perspectives, to share their views on what to know and do when the road gets rocky.



Focus on your behavior, not the market’s.

Michael Liersch, PhD, Head of Goals-Based Advice and Strategy, J.P. Morgan


You can’t control volatility, but you can control how you react to it. Don’t try to do too much, if anything at all. If you’re still on track toward your investment goals, or won’t need the money for many years, the best course of action may be to simply do nothing.


When changes are needed, keep them small and in line with your goals. For example, you could start automatically investing the same amount each month to avoid the temptation of timing markets. Or you could tweak your spending habits, savings levels, or investment strategy if you find yourself falling behind. Above all, always take a step back and remind yourself why you’re investing before making any hasty decisions.

“You can’t control volatility, but you can control how you react to it.”

Michael Liersch

PhD, Head of Goals-Based Advice and Strategy, J.P. Morgan

Volatility is normal; don’t let it derail your plans

Andy Goldberg, Global Head of Client Investment Strategy, J.P. Morgan Private Bank


Every year has its rough patches, even the good years. On average, U.S. stocks have declined nearly 14% during the course of each year since 1980 (see the red dots in the chart below). And yet, the market went on to earn positive returns in 29 of those years, or roughly 75% of the time (blue bars). Investors who sold during the lows often missed out on the highs.


You can’t predict downturns, but you can prepare for them. Create a plan for riding out volatile periods instead of moving out of the market before it has time to recover.

Long-term investors shouldn't overreact to short-term volatility
S&P 500 intra-year declines (max drawdowns) & calendar year returns

Despite average intra-year drops of 13.8%, annual returns were positive in 29 of 38 years.


Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Intra-year drops refer to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2017, over which time period the average annual return was 8.8%. Data are as of 7/31/18. [Note: From p. 13 of Guide to the Markets]

Stay diversified to stay invested

Richard Madigan, Chief Investment Officer, J.P. Morgan Private Bank


If you invest long enough, you’re bound to experience market peaks, troughs, and everything in between. However, history teaches us two lessons. First, stocks and bonds have gone up over time. Second, staying invested helps you participate in those gains.


Our goal is to build well-diversified portfolios that clients can stick with through the ups and downs. We purposely include assets with the potential to perform well in periods of market stress. When other investments fall, they may rise to help cushion the loss and avoid selling at the worst possible time. Remember, steady hands prevail.

Avoid “dollar cost ravaging” during retirement

Katherine Roy, Chief Retirement Strategist, J.P. Morgan


If you invest regularly before retirement, you can take advantage of market volatility by buying more shares when prices are down—this is known as dollar cost averaging. During retirement, however, volatility may force you to sell more shares when prices are down to meet your spending needs—we call this “dollar cost ravaging.”


When you earn investment returns is just as important as how much you earn. This chart shows how a combination of market losses and portfolio withdrawals early in retirement can cause a nest egg to run out of money, despite strong overall performance. Possible solutions to dollar cost ravaging include broader diversification, defensive investment strategies aimed at limiting losses, and annuities offering guarantees or protection features.

Dollar cost ravaging - timing risk of withdrawals

Growth of an investment (1966-1995)


Assumptions: Enter retirement at age 60 with $1,000,000. Start with a 5.4% withdrawal of $54,000. Increase dollar amount of withdrawal by overall rate of inflation (3%) each year, which is lower than the average inflation rate of the period between 1966-1995.

Rate of return: average vs. actual (1966-1995)


Source: J.P. Morgan Asset Management. Returns are based on a hypothetical portfolio, which assumed to be invested in 40% in S&P Total Return Index and 60% in the Barclay’s Capital U.S. Aggregate Index. The assumptions are presented for illustrative purposes only. They must not be used or relied upon to make investment decisions. There is no direct correlation between a hypothetical investment and the anticipated future return of an index. Past performance does not guarantee future results.

Markets change: the need to invest for college doesn’t

Michael Conrath, CFP®, CRPC, Head of 529 College Savings Plan Business, J.P. Morgan Asset Management


When it comes to college, most families need to take on some risk because savings alone won’t pay the rapidly rising costs (see chart below). However, you don’t want too much risk because those bills start coming due in just 18 years, at most.


Most 529 college savings plans offer “age-based portfolios” to help address both issues. They diversify across a mix of investments with long-term growth potential, starting out more aggressively and automatically becoming more conservative as college gets closer. Furthermore, distributions from a 529 plan are tax-free when they’re used to pay qualified education expenses.


No matter how you invest, keep at it during volatile markets. Given the relatively short time frame, skipping even a few contributions can reduce your college fund and increase the need for expensive student loans. Consider arranging automatic transfers from a bank account each month to remove much of the guesswork and emotion from investing.

Savings alone won't pay for college


1Federal Reserve, as of 8/10/18.
2BLS, Consumer Price Index, from 12/31/82 to 12/31/16.
3Barclays Capital, FactSet. Average annual return based on rolling 18-year periods and calendar-year returns from 1983 to 2016. Stocks are represented by S&P 500 Index and bonds by Bloomberg Barclays U.S. Aggregate Index. Data are as of 12/31/16. Past performance is not indicative of future results.


Next Steps: Put These Ideas into Action



All guarantees are backed by the claims-paying ability of the issuing insurance company.

Some states, for example, offer favorable tax treatment and other benefits to their residents only if they invest in the state’s own Qualified Tuition Program. Investors should determine if their home state offers 529 Plan that may o er such favorable tax treatment and benefits to residents or beneficiaries of that state that may not be available to investors or beneficiaries of other states. Investors should consult their legal, tax or accounting advisor before investing in any 529 Plan or contact their state tax division for more information. JPMorgan Chase Bank, N.A. and its affiliates do not offer legal, tax or accounting advice.

The views and opinions expressed in this material are those of the featured J.P. Morgan Chase & Co. (“J.P. Morgan”) employee and do not
necessarily reflect the policies or positions of JPMorgan Chase & Co. The material is provided for informational purposes only and is designed to provide general market commentary. It does not constitute J.P. Morgan research nor should it be considered a recommendation of a particular investment strategy or an offer or solicitation for the purchase or sale of any financial instrument. Opinions and estimates offered constitute the featured J.P. Morgan employee’s judgment as of the date of this material and are subject to change without notice as are statements of financial market trends, which are based on current market conditions. J.P. Morgan believes the information provided here is reliable, but do not warrant its accuracy or completeness. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation for any particular action.

Investing involves market risk, including the possible loss of principal. Investments in international or emerging markets can be more volatile and involve a greater degree of risk. Not all investments or strategies are suitable for all investors and there is no guarantee that a particular
investment objective will be achieved. Past performance is not a guarantee of future results. You should speak to your financial advisor before making any investment decisions. J.P. Morgan and its affiliates do not provide legal, tax or account advice so you should seek professional guidance if you have questions.

Diversification does not ensure a profit or protect against a loss.

© 2018 JPMorgan Chase & Co.


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