Road to Stock Market Rebound Was Rocky

When Markets Are Recovering, Don't Ignore Volatility

By KENT HARGIS, SAMMY SUZUKI, & CHRIS MARX/Guest Contributors

Global stocks rebounded sharply from the coronavirus market crash in 2020, but the ride was rocky. Even in a rising market, volatility is a clear and present danger. With so many risks clouding the outlook, we believe that investors should focus on generating a smoother pattern of returns through the recovery from COVID-19.

When equity markets tumbled in early 2020, controlling volatility was a high priority for many investors. But as markets recovered through the last nine months of the year, volatility might have seemed less pressing.

In fact, volatility persisted through 2020, even as stocks recovered. The daily volatility of the MSCI ACWI Index was 28%—nearly three times higher than in 2019. The index rose or fell by at least 1% in 90 days during 2020—more than three times as frequently as in 2019.

Click chart to enlarge.

Stay Invested Through Volatile Episodes

Big drawdowns can be unsettling for investors. But selling out of equities when the market corrects is often a mistake. Indeed, investors who exited stocks during the COVID-19 crash during February and March of 2020 would have locked in losses and missed the rebound through the rest of the year. Since it’s almost impossible to time inflection points in the market, we believe staying invested through bouts of volatility is essential for success.

Even after recovering most of the losses from the first quarter 2020 sell-off, news of vaccine breakthroughs has pushed equity markets higher since November. Yet the world’s exit path from the pandemic is still highly uncertain. Restoring global economic growth will be an uneven process that will depend on fiscal policies, public health concerns and consumer confidence. These are just some of the risks that may continue to fuel volatility this year. In this environment, we think it’s important to consider investment strategies that can help investors capture good sources of long-term return potential but that are also designed to help reduce risk in falling markets and deliver a more comfortable investment journey.

About the Authors: 

Kent Hargis is Co-Chief Investment Officer of Strategic Core Equities at AllianceBernstein. He has been managing the Global, International and US portfolios since their inception in September 2011, and the Emerging Markets Strategic Core Portfolio since January 2015. Hargis was named head of Quantitative Research for Equities in 2009, with responsibility for overseeing the research and application of risk and return models across the firm’s equity portfolios. He joined the firm in October 2003 as a senior quantitative strategist. Prior to that, Hargis was chief portfolio strategist for global emerging markets at Goldman Sachs. From 1995 through 1998, he was assistant professor of international finance in the graduate program at the University of South Carolina, where he published extensively on various international investment topics. Hargis holds a doctorate in economics from the University of Illinois, where his research focused on international finance, econometrics and emerging financial markets. He is located in New York.

Sammy Suzuki is Co-Chief Investment Officer of Strategic Core Equities at AllianceBernstein. He has been managing the Emerging Markets Strategic Core Portfolio since its inception in July 2012, and the Global, International and US portfolios since 2015. Suzuki has managed portfolios for well over a decade. From 2010 to 2012, he also held the role of director of Fundamental Value Research, where he managed 50 fundamental analysts globally. Prior to managing portfolios, Suzuki spent a decade as a research analyst. He joined AB in 1994 as a research associate covering the capital equipment industry, and then became an analyst covering the technology industry. Suzuki became portfolio manager in 2004. From 1998 to 2004, he served as senior research analyst for the global automotive industry. Before joining the firm, Suzuki was a consultant at Bain & Company. He holds a bachelor's degree in materials science and engineering and a bachelor's degree in finance (both magna cum laude) from the University of Pennsylvania. He is a CFA charterholder and a member of the Board of the CFA Society New York. He is located in New York.

Christopher W. Marx is a Senior Investment Strategist for Equities at AllianceBernstein. He works with clients across a range of equity services and also serves as an advisory member on the Strategic Core investment team. Previously, Marx was a portfolio manager of Equities. In 2011 he cofounded the Global, International and US Strategic Core Equity portfolios with Kent Hargis. Marx joined the firm in 1997 as a research analyst covering a variety of industries both domestically and internationally, including chemicals, metals, retail and consumer staples. He became part of the portfolio-management team in 2004. Prior to joining the firm, Marx spent six years as a consultant for Deloitte & Touche and Boston Consulting Group. He holds a bachelor's degree in economics from Harvard University and a MBA from the Stanford Graduate School of Business. He is located in New York.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time. AllianceBernstein Limited is authorized and regulated by the Financial Conduct Authority in the United Kingdom. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. AllianceBernstein is an Associate member of TEXPERS. The views expressed in this article are those of the author and not necessarily William Blair nor TEXPERS.

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