Confidence rebounds
Confidence rebounds
Markets showed signs of optimism in May following pauses in planned tariffs.
Markets showed signs of optimism in May following pauses in planned tariffs.
06/06/2025
MARKET VOLATILITY
Market volatility’s impact on the markets
Key points
Many volatile factors
Market volatility happens for many reasons including economic influences, geopolitical events and corporate earnings reports.
Navigating volatility
Investors may be able to navigate volatile markets with long-term investing and diversification.
Investing markets are influenced by many factors, creating what’s called market volatility. From corporate earnings reports to global political instability to global pandemics and economic influencers like inflation and interest rates, there are many factors that can result in the prices of stocks and bonds going up or down.
As you can see from the chart, measurements of volatility are frequently reflected in performance in the S&P 500, which then affects the investments in your portfolio. The chart below better highlights market performance by calendar year, with a clear comparison of the number of positive versus negative years.
Periods of increased market volatility will happen, and when they do, there’s a strong probability it will affect your investments. Two ways to navigate volatile markets include:
Adopting a long-term investing approach. As both charts demonstrate, even through the largest volatile swings of the last two decades, the S&P 500 Index maintained long-term growth—and maintained positive growth roughly 75% of the years since 1922. Long-term investors take the approach of riding out market swings in anticipation that their investments will recover from any dips with the next upswing.
Diversification. Not all types of investments are affected at the same time by the same amount when volatility influences markets. For example, investments in the energy sector performed well in 2022 but struggled in 2023, as demonstrated in the chart below. On the other hand, investments in the information technology sector had low performance in 2022, but thanks in part to artificial intelligence, performed well in 2023.
Understanding market volatility
It’s important for investors to understand what kind of volatility is impacting markets like the S&P 500 Index. If you need assistance in evaluating your investment portfolio and how volatility may impact your investments, contact your Thrivent financial professional. Once you’ve evaluated your investment portfolio, start your investment journey with these three steps.
The concepts presented are intended for educational purposes only. This information should not be considered investment advice or a recommendation of any particular security, strategy, or product.
Thrivent financial professionals are registered representatives of Thrivent Investment Management Inc. Thrivent Investment Management Inc. is an SEC-registered investment adviser and broker/dealer, and a member FINRA and SIPC and a subsidiary of Thrivent, the marketing name for Thrivent Financial for Lutherans.
Communication services represents companies involved in advertising, broadcasting, cable and satellite, publishing, movies and entertainment and interactive media and services, as well as those that provide telecommunication services primarily through a fixed-line, wireless, cellular, high bandwidth or fiber optic cables.
Consumer discretionary companies are most sensitive to economic cycles, such as automotive, household durable goods, textiles & apparel, leisure equipment, hotels, restaurants, consumer retailing and services.
Consumer staples companies have businesses that are less sensitive to economic cycles such as manufacturers and distributors of food and beverages, tobacco, and producers of non-durable household goods and personal products.
Energy companies have businesses that are involved in the construction or provision of oil rigs, drilling equipment, energy related service and equipment or engaged in exploration, production, refining of or transportation of oil and gas products, coal, and other consumable fuels.
Financials represents companies whose activities include banking, mortgage finance, consumer finance, specialized finance, investment banking, brokerage, asset management and custody, corporate lending, insurance and financial investment.
Health care companies manufacture healthcare equipment and supplies or provide healthcare related services. Companies involved in research, development, production and marketing of pharmaceuticals and biotechnology products.
Industrials companies produce tangible goods including aerospace and defense, construction, engineering, building products, electrical equipment and industrial machinery. Companies that provide commercial services such as printing, employment, office services and environmental services, as well as transportation services including airlines, couriers, marine, road and rail, and transportation infrastructure.
Information technology companies primarily develop software such as applications, systems, database management, internet, information technology consulting and services, and home entertainment. Companies that manufacture or distribute communications equipment, computers and peripherals, electronic equipment and related instruments, as well as semiconductors and semiconductor equipment manufacturers.
Materials represents companies that manufacture chemicals, construction materials, glass, paper, forest products and related packaging products and metals, minerals, and mining companies, including steel producers.
Real estate represents the sector containing real estate management and development services and all real estate investment trusts (REITs), with the exception of mortgage REITS.
Utilities represents companies that are considered electric, gas, or water utilities or companies that operate as independent producers or distributors of power.
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