What Market Volatility Really Is and How to Navigate It
Volatility refers to the magnitude of movement instead of a single direction; AAII founder James Cloonan encouraged investors to focus on “real risk.”
Volatility returned to the stock market this year in a big way.
The S&P 500 index lost 18.9% of its value in a period of just seven weeks between the middle of February and early April 2025. It then needed just five weeks to rebound to breakeven for the year.
Accompanying these large swings have been big daily moves. The S&P 500 experienced five days with a daily change of more than 3%: two up and three down in April and May. The last time the S&P 500 experienced a daily change that big was on November 10, 2022, when it gained 5.5%.
Volatility is regularly perceived in a negative light. Yet, volatility is not the same as direction. Here’s how Merriam-Webster’s Collegiate Dictionary defines it: “The quality or state of being volatile: such as a tendency to change quickly and unpredictably.”