• Serendipity Team

Is share market volatility here to stay?

Recently we’ve seen some wild volatility in share markets across the world due to the pandemic and military conflict. We examine what’s going on, the drivers behind the price swings and how long they could last. Importantly, we consider what volatility could mean for your retirement savings.


March 2020 signalled the beginning of a rollercoaster ride for investors, with share market volatility at levels not seen since the Global Financial Crisis more than a decade ago. The global COVID-19 pandemic sparked numerous periods of high volatility. We saw share prices for travel companies crash when countries closed their borders and markets soar when economies began to reopen.


Now the Russian invasion of Ukraine and the emergence of the COVID-19 Omicron variant means that heightened share market volatility is likely to continue. It’s being fuelled by ongoing coronavirus contagion fears and economic shocks as governments and businesses wrestle with containing its spread.


What drives share market volatility?

Put simply, market volatility is the frequency and magnitude of share price or index movements, up or down. The bigger and more frequent the price or index swings, the more volatile the market is said to be. A lower volatility means that the value of the share or index changes steadily over time. A higher volatility means the value changes dramatically over a short period of time.

In general, volatility indicates a certain asset’s stability and risk. Usually, the higher an asset’s volatility, the riskier it’s considered to be.

Historic volatility is calculated using a series of past market prices. In contrast, implied volatility looks at expected future volatility, based on the market price of market-traded derivatives like stock options. Be reassured that volatility is a natural part of the market cycle.

The main drivers of share market volatility include:


Political and economic signals

Governments play a major role in regulating industries, impacting share prices when they make decisions on trade agreements, legislation and policy.

Economic data, such as the inflation rate, also play a role. When the economy is doing well, investors tend to react positively. In contrast, if data misses market expectations, markets may become more volatile.


Industry and sector dynamics

Specific events can cause volatility within a particular industry and sector. For example, border closures and extended lockdowns due to COVID-19 hurt travel, tourism and retail sectors. As a result, concerns about future earnings growth led to falls in share prices for these sectors.


Individual company performance

Volatility isn’t always market wide and can be specific to individual companies. Positive news, such as a strong earnings report or an innovative new product, may raise a company’s share price. Conversely, a product recall or regulatory breach can hurt the share price, as investors sell their holdings.


How long might volatility last?

Market watchers believe the current levels of heightened volatility are likely remain in place, at least for some time.1 Because sentiment plays a part, commentators often use the VIX as a gauge of the market’s outlook for volatility.


How to manage share market volatility

While periods of heightened volatility will come and go, retirement savings such as superannuation are a long-term investment. Here’s some ways to help manage the unsettling effects of share market volatility:


Stick to your plan.

It can be uncomfortable to stay the course when markets fall yet doing so can result in greater accumulated wealth over time. Track your progress toward your retirement savings goal, not short-term performance.


Diversify your portfolio

Diversifying your investments can help reduce your risk and the impact of share market volatility. Large exposure to one particular asset class or a particular type of investment means that you’re more exposed to fluctuations. If your investments are spread across a range of sectors or investment types, you’re less likely to see a drop in your overall portfolio balance.


Shut out the noise

It’s easy to be distracted when headlines focus on falls in the share market. When this happens, remind yourself that volatility is a normal part of investing. History shows that financial markets fluctuate and then recover.2


Seek expert financial planning advice

If you have questions about how share market volatility could impact your retirement savings or investments talk to your financial adviser at Serendipity Wealth Advisors. We can review how you are tracking towards your long-term goals and help you manage the unsettling effects of share market volatility. Consider booking complimentary initial consult and find out how we can help you create the future of your dreams


What you need to know


This information is provided and produced by Serendipity Wealth Advisors. The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.


1. M A El-Erian, ‘Stock Market Volatility Will Persist – For Now’, Bloomberg Opinion, 1 February 2022, accessed 14 February 2022.

2. G Hand, How stock markets recover and the perils of timing markets, Firstlinks, 18 March 2020, accessed 15 February 2022.