Stocktake: 2022’s market volatility is normal

April was another lousy month for stocks, with indices weighed down by one worry after another – war in Ukraine, a hawkish Federal Reserve, soaring inflation, recession fears and a Chinese slowdown.

And yet, the market action may not be as dire as it seems.

Historically, US midterm election years can be tricky for stocks, suffering an average peak-to-trough fall of 17 per cent, says LPL Research. Such declines are usually fleeting, with stocks gaining an average of 32 per cent in the year following those lows.

Additionally, while today’s woes may seem pressing, sizeable market corrections are not uncommon. Since 1980, says LPL, the average annual correction is 14 per cent, “putting this year’s 13 per cent correction in perspective”.

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The S&P 500 has experienced a double-digit decline in 21 of the last 42 years. In 12 of those years, stocks rebounded and ended the year with gains.

Of course, 2022 might be different. Stocks may keep falling. This may be a global bear market. Less than 20 per cent of international markets are above their 50-day averages, notes All-Star Charts' Willie Delwiche, a new low for the year.

Still, volatility is the price you pay for long-term investment returns. Market declines can be nerve-racking, but they’re perfectly normal.