Now leaving ThriventFunds.com

 

You're about to visit a site that is neither owned nor operated by Thrivent Asset Management.

In the interest of protecting your information, we recommend you review the privacy policies at your destination site.

Financial Professional Site Registration

Complete this form to get full access to the entire financial professional site.

By clicking “Register”, you agree to our privacy and security policies and that you are a financial professional.

Access will be granted immediately, but the registration process may take up to 5 business days to complete.

Thank you for registering

You can now enjoy all financial professional content.

If your download does not start automatically, click here.

An error occurred

Please check back later.

COVID-19 UPDATE

Short rallies and volatility merit extra caution

03/27/2020

By David Royal, Chief Investment Officer | 03/27/2020

A week for the record books

It’s been quite a week—and even that feels like an understatement. Tuesday through Thursday represented the largest three-day gain in the S&P 500 ever, and that’s in percentage terms, not just in points. The index jumped 17.55% during that period, exceeding the second-largest three-day advance of 13.95% in November of 2008. Even though the S&P 500 dropped more than 3% today, this week represented the biggest weekly advance since the 1930’s. One question you may have–one that has been discussed quite a bit in the financial news the past couple days–is how to invest during a sharp short-term rally in a market that is still down more than 20% since mid-February.

Have markets hit bottom?

I can’t tell you what the stock market is going to do in the coming days or weeks, but I’d like to give you some perspective on sharp upward reversals in stocks during major bear markets. These types of big rallies are not uncommon in down markets. In fact, there were four upward moves of greater than 10% in the S&P 500 during the global financial crisis of 2008-09; three of those four rallies occurred before the market bottomed in March of 2009.

Periods such as this merit extra caution. Volatility often increases, sometimes dramatically, following steep market declines as stocks struggle to find a bottom. We can see violent moves, both upward and downward. History shows us that of the ten largest three-day gains in the S&P 500 prior to this week, 60% of the time the index was lower one month later. However, in 90% of those same instances, the index was higher six months later.

The lesson in this data is that the market will often give investors several “head fakes” as it finds a long-term bottom, rallying hard only to give up those gains and reach a lower low. Investors in a position to add to their stock exposure would generally be well-advised not to overcommit to any one upward or downward move in the market. Don’t go “all-in” on any drop, since stocks may turn upward only to fall again. And don’t chase a rising market, perhaps from a fear of missing out on a rally, by putting too much money to work at once. The market will often provide another opportunity to invest at levels near its lows.

Revisit asset allocation

Of course, it’s always a good idea for an investor to consider his or her long-term target investment allocations. But rebalancing to an appropriate asset allocation is even more important in periods such as this, with market volatility contributing to massive advances and declines on a sometimes-daily basis. Not only do allocations get out of balance more easily at times like this, but the consequences of being over- or under-weight an asset class are greater in times of extreme volatility, since smaller divergences from a target allocation can have greater effects.

I wish you all a safe and enjoyable weekend. Our team looks forward to seeing what the market brings next week.

David Royal
Chief Investment Officer

All information and representations herein are as of 03/27/2020, unless otherwise noted.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management, LLC associates. Actual investment decisions made by Thrivent Asset Management, LLC will not necessarily reflect the views expressed. This information should not be considered investment advice or a recommendation of any particular security, strategy or product.  Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

Any indexes shown are unmanaged and do not reflect the typical costs of investing. Investors cannot invest directly in an index.

Past performance is not necessarily indicative of future results.

Related content

1st Quarter 2021 Market Review

04/06/2021

1st Quarter 2021 Market Review: Stocks reach new highs as economy reopens

1st Quarter 2021 Market Review: Stocks reach new highs as economy reopens

1st Quarter 2021 Market Review: Stocks reach new highs as economy reopens

The stock market continued to surge in the 1st quarter, as the vaccine roll-out led to optimism that the economy was on its way to a recovery. Bond yields also rose to their highest yields since the start of the pandemic on inflation concerns, as Congress approved another $1.9 trillion in pandemic-related stimulus funding.

The stock market continued to surge in the 1st quarter, as the vaccine roll-out led to optimism that the economy was on its way to a recovery. Bond yields also rose to their highest yields since the start of the pandemic on inflation concerns, as Congress approved another $1.9 trillion in pandemic-related stimulus funding.

04/06/2021

2nd Quarter 2021 Market Outlook

04/06/2021

2nd Quarter 2021 Market Outlook: Solid economic growth on the horizon

2nd Quarter 2021 Market Outlook: Solid economic growth on the horizon

2nd Quarter 2021 Market Outlook: Solid economic growth on the horizon

Some of the major shifts in the capital markets that began in the 4th quarter of 2020 have continued into the new year – but not in a steady progression. 

Some of the major shifts in the capital markets that began in the 4th quarter of 2020 have continued into the new year – but not in a steady progression. 

04/06/2021

Market Updates [PODCAST]

04/06/2021

 Is inflation on the doorstep? [PODCAST]

Is inflation on the doorstep? [PODCAST]

Is inflation on the doorstep? [PODCAST]

Inflation has been under control for decades. But will this streak continue as we come out of the pandemic? — Thrivent Distributors, LLC is a member of FINRA/SIPC and a subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans.

Inflation has been under control for decades. But will this streak continue as we come out of the pandemic? — Thrivent Distributors, LLC is a member of FINRA/SIPC and a subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans.

04/06/2021