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Managing market volatility

Why it’s ok to invest during uncertainty

From geopolitical shifts to central bank rate-setting, uncertainty is everywhere

Managing market volatility

From war to AI, to lingering questions around the rate-setting strategy of central banks, uncertainty appears to be everywhere you look.

As long-term, active investors, however, what we have long understood is that volatility is a feature, not a bug of financial markets. Moreover, volatility is something many active managers use to their advantage. Here are some questions we’ve been asked about volatility, with answers provided from our range of experts across the Natixis Investment Managers family.

Whether it’s Covid, war, or Trump’s tariffs, the uncertainty and volatility experienced over the past five years is being felt across financial markets – and it looks set to be with us for the foreseeable future.

As Julien Dauchez, Head of Portfolio Consulting & Advisory at Natixis IM Solutions, explains: “We’re in a very different place from the investment environment we lived in from 2010 to 2020, which was characterised by lower rates, lower inflation and lower volatility.

“Average equity volatility is higher since 2020, the spikes in volatility are becoming more frequent, and volatility of volatility – which reflects how much the market's expectations of future volatility are changing – is also on the rise.”

In the short term, there is always a degree of volatility – and uncertainty. But if you look over the longer term, the highs and the lows get smoothed out into a gentle climb.

As the chart shows, we get dramatic market selloffs every few decades, and they vary in size and scale, but the bull runs far outpace the bears. In short, there are more ups than downs, both in frequency and magnitude.

Bull and Bear Markets since 1954
Source: Bloomberg, US Solutions

And in such times of wild market volatility and investor uncertainty, it should be comforting to realise that diversification, analysis, and time-tested investment themes are more important than ever

Important information

Marketing communication. This material is provided for informational purposes only and should not be construed as investment advice. Views expressed in this article as of the date indicated are subject to change and there can be no assurance that developments will transpire as may be forecasted in this article. All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

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