Explore Our
“Off The Wall” Blog

Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.

Keeping Recent Volatility in Perspective


Investors get worried when we see market pullbacks of 5%. I get it, no one likes to see the market go down.

I think concerns over a market pullback are particularly heightened right now based on a combination of different issues in the news like:

  • Continued concerns over COVID
  • Slowing global growth
  • Potential tapering by the Fed
  • Ambiguous fiscal policy
  • Government shutdown and debt ceiling worries
  • Potential risk from China’s property sector

Add to this that we have seen really strong year-to-date gains and it’s easy to see how an amplified sense of urgency has been created to “do something” (i.e. sell or hedge).

So let me take a step back and put some of these developments into perspective.

We think the underlying fundaments in the market remain supportive. Now I know that sounds like finance “blah blah blah,” BUT, it’s looking like the latest wave of COVID has peaked…and while, yes, winter is coming, each wave does bring higher levels of public immunity along with continued vaccinations.

Corporate earnings remain supportive. It’s looking like earnings will have a 50% growth rate year-over-year and will be 20% above 2019 levels (my attempt to factor out the trough of 2020). 75% of market peaks generally occur +2 years after peak earnings and record earnings are fuel for corporate buybacks.

The odds are in your favor as it relates to staying invested in the equity market right now. No one is forcasting a recession at a level above the 10% probability mark and our MONCON model is at a 5—the lowest probability reading for a recession. The economy is in expansion and according to a recent Goldman Sachs report, there is an 87% chance that investors will enjoy a positive return over the next year with a 64% chance of a +10% return and 30% chance of a +20% return.

No guarantees, but we play the odds. And these are great odds. Here are some charts from Goldman.

Odds of Returns During Expansion

This next chart highlights that past economic expansions are generally related to noteworthy market upside, even after gains like we have experienced since the 2020 trough–so there is a lot of precedence for more market returns.


Finally – I’ve written about this before, but market pullbacks are inevitable. I mention it again because, well, it’s true, BUT ALSO, there was a chart in that same Goldman report that highlights what I’ve mentioned on this before: shit happens. At a 95% probability level, it’s essentially statistically impossible to avoid a 5% pullback, and there is a 75% chance of a 10% pullback over an investing year when valuations are high (that’s the 9th and 10th decile mentioned).

Probability of a Drawdown

So again, because we like to deal in probabilities (odds), it’s essentially assured that you will participate in a 5% pullback, and HIGHLY PROBABLE, you will experience a 10% pullback.

Pullbacks happen during market highs, but they are generally short-lived, so my opinion is that they are not good reasons to exit portfolios and hedge. ESPECIALLY NOW! Here’s some evidence again from the same Goldman report.


As always, our best advice is to hedge against losses by having a cash position that enables you to ride out any short-lived pullback.

Keep looking forward.

DBA Signature



David B. photo

David B. Armstrong, CFA

President & Co-Founder

Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....

Learn more ...


Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“Monument”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Monument. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.

A copy of the Monument’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures. Please Note: Monument does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Monument’s website or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results.  It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.

Please Remember: If you are a Monument client, please contact Monument, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Stay up to date!

Subscribe to our “Off the Wall” Blog for articles and videos on all things wealth management, by all members of our Team. Unlike Facebook, we will never share your data with anyone.