Staying the course
The latest World Economic Forum’s Global Risks Report 2026 finds the world in an “age of competition”, marked by fragmentation and confrontation. We face daily headlines which disturb any sense of ‘business as usual’. Both the short and long-term outlooks of leaders and risk experts predict “turbulent” to “stormy” times as the world adjusts to new global relationship structures. Geoeconomic confrontation, mis- and disinformation and societal polarisation make up the top three short-term risks, while environmental risks dominate in the long term.
Added to the risks above, the biggest stockmarket in the world, the US, which accounts for roughly 70% of total global market capitalisation, looks expensive on many valuation measures and there are plenty of market participants warning of the risks of a correction.
Periods of geopolitical uncertainty—such as ongoing conflicts, trade tensions, or shifting global alliances—often bring heightened volatility to financial markets. Investors tend to reassess risk quickly. This can lead to sharp market movements in both directions as expectations change.
While headlines can feel unsettling, market volatility itself is not unusual, nor is it inherently negative. Volatility is a feature, not a flaw. What matters most is how investors understand and respond to it. It’s also important to remember that markets react not only to events themselves, but also to surprises. Once risks are better understood or priced in, markets often stabilise—even if the underlying situation remains unresolved.
Even if we appreciate that volatility is a normal part of investing, it may be helpful to understand what may happen in uncertain times. The chart shows how often the US stockmarket has fallen by 10%, 20% or 30% over the last 100 years.
- Drops of more than 10% happened in 57% of years (56 out of 98 years).
These kinds of declines are very common. - Drops of more than 20% happened in 30% of years (29 years). Bigger declines are less common but still a normal feature of stockmarkets.
- Drops of more than 30% happened in 10% of years (10 years). Very large declines such as these are rare, but they do happen.
It’s important to keep in mind that a bad stretch doesn’t mean a bad year is to come. Of the 29 years in which the market fell by 20% at some point, only six ended the year down more than 20% and in 10 of those years, the market actually finished the year with a gain. The year that Covid hit, 2020, is a good case in point. The pandemic shock sent the market into a decline of over 30% in March 2020, but it closed the year up over 15%. This reinforces the lesson that the most reliable course of action following a market downturn is to stay invested.
Bottom line: Volatility is a normal part of investing. Trying to avoid volatility altogether usually means avoiding growth assets entirely, an approach that carries its own risks, particularly for long-term goals like retirement.
For additional insight on this topic, we invite you to view the video “Tune Out the Noise”, available in the Education section under Resources.
