One of the things successful equity investors need to accept is volatility in their equity portfolios is the price paid for greater potential long term returns. Last year was unprecedented for equity markets as we experienced one of the longest periods of low volatility and a strong market.
More typical are equity markets fluctuating around a trend line which may be up or down. It is the opinion of a number of equity managers I follow and based on equity valuations, current and projected earnings and considering equity holdings of the average investor (still below 2007 holdings) that this equity market has a year or so to run.
Link to Ben Carlson’s article on what to expect as volatility returns to equity markets
“Overall, U.S. households have $900 billion less invested in stocks than in 2007, according to Goldman Sachs research, leaving buying by U.S. corporations now the greatest driver of demand. In 401(k) retirement plans, meanwhile, investors now hold an average of 52.4 percent in equity-only funds, down from the 64.7 percent they held in 2007, according to Fidelity.
“Instead, investors now hold an average of 33.2 percent of their assets in blended target-date funds that combine stocks, bonds and cash based on a person’s expected retirement date, more than double the 14.5 percent of assets invested in the category in 2007.”