Volatility is the Price of Admission

One of my favorite quotes about the stock market is by US billionaire, Mike Novogratz,

he is famous for saying “volatility is the price of admission”.

This quote recently got me thinking due to the volatility in the S&P market cap weighted

index over the last week. In the last two years the US stock market has been on an

absolute tear, thanks to the magnificent 7 stocks. During this time, the S&P 500 cap

weighted index has seen returns of 24% in 2023 and 23% in 2024. More interesting is

during those two years the intra-year downturn was no more than 10% in any of those

years. Now, you may ask, why is that interesting? It's interesting because since 1980

the average intra-year downturn of the S&P 500 is 14.1% from its highest to its lowest

point in any given year, see illustration below from JP Morgan’s Guide to the Markets

Feb 2025.

Furthermore, since the inception of the S&P 500, a pullback greater than 5% or more in

a single month happens 2-3 times a year, meaning in any given month this happens 20-

25% of the time. Now, if you lived during those months it seemed like the world was

ending and all hell was going to break loose. But when you look back, in the grand

scheme of things, “it’s a pimple on a nats ass”. (My small town country saying for the

day). The most important part is over time positive monthly gains are greater than

negative monthly losses.

I will again say this like I have said before, we cannot time the stock market, I don’t

believe anyone can consistently. And for the first time in two years, asset classes other

than the S&P 500 are outperforming year to date. So, if a correction of 10% or more

happens within the S&P 500 this year, not saying that it will or won’t, know that this is

normal and is the price of admission.

Good news for our clients, we don’t have all our eggs in just the S&P 500 nor just in the

U.S. for that matter, but a well-constructed globally diversified portfolio ready to act on

opportunities as they come.

Stay the course, be happy when the market is on sale, especially when you don’t need

that portion of money for many years as the dividends and cash that’s put in are buying

at a discount.

With that, attached is this week’s Market Commentary and remember to buy low and

sell high!