It’s been more than seven years since the beginning of the financial crisis and a new survey shows many investors have become more tolerant of big swings in market volatility.
According to the latest results from the MFS Investing Sentiment Insights Survey, more than 70% of investors surveyed say the ups and downs of the past few years are part of a normal market cycle.
Which is a good thing because LPL’s Burt White is calling for more volatility in 2016.
“We expect volatility to be with us again in 2016 as the business cycle ages, making sticking to your long-term investment habits even more important to avoid locking in losses and missing out on opportunities,” wrote White, chief investment officer for LPL Financial, in the firm’s weekly commentary.
He says 2016 may require tolerance for volatility. According to White, a number of factors beyond the aging business cycle could lead to increased market volatility in 2016.
“The Fed is about to embark on its first rate hike campaign since 2004-06,” writes White. “A further pronounced drop in oil prices — though not our expectation — could negatively impact the global economy and markets. And recent terrorist attacks in Paris and the associated military response highlight the heightened geopolitical risk in the Middle East and throughout the world.”
White stresses how important it is to “stick with your habits” even through volatility.
LPL Research expects stocks to produce mid-single-digit returns for the S&P 500, consistent with historical mid-to-late economic cycle performance, driven by mid- to high-single-digit earnings and a largely stable price-to-earnings ratio (PE).
As White explains, “this return to a more normal market may mean more volatility, challenging investors’ ability to stay focused on their goals.”
Meanwhile the MFS Investing Sentiment Insights Survey is showing that although almost six in 10 investors are concerned about a major drop in the stock market over the next 12 months, 93% said they would either add to their holdings or do nothing as a result of recent market volatility.