While markets have experienced a sudden bout of equity volatility, investors should still maintain a positive outlook on the overall stock market and related ETFs to capture the ongoing long-term growth potential.
The “equity sell-off has been triggered by fears of higher inflation and higher interest rates that have been exacerbated by investor complacency,” Jeff Schulze, Investment Strategist for ClearBridge Investments, said in a note. “We believe the selling is overdone and that the market can handle higher rates if the ascent is not too rapid. Long-term volatility measures suggest investors are willing to look past short-term price swings and focus on solid economic growth as a driver of equity performance.”
Schulze pointed out that corrections and market pullbacks are a normal occurrence in a healthy equity environment. Investors shouldn’t think that this is a one-off event and should become familiarized with such events, which are typically followed by a period of heightened volatility as fear begins to seep into traders’ mindset.
While short-term volatility has spiked, long-term volatility remains muted, reflecting a stable outlook over longer periods, especially as more focus on stronger economic growth in the U.S. and abroad.
Nevertheless, as the U.S. equity bull market grows long in the tooth, investors can consider an actively managed ETF to bank on a seasoned investment team’s ability to sift through various stocks and pick out companies with solid fundamentals that may continue to push ahead.