Why You Shouldn’t Panic Over Daily Market Swings: A Creative Perspective on Market Volatility
As an avid follower of both college basketball and the stock market, I can’t help but draw parallels between the two. The recent NCAA Men’s Final Four was a rollercoaster of emotions with unexpected momentum shifts, lead changes, and moments that left fans breathless. But, could we say the same about the stock market in 2025? It seems that this year has delivered its fair share of dramatic daily swings—some akin to the most nail-biting moments of a championship game.
The Battle of Dramatic Swings: Stock Market vs. College Sports
Let’s reflect—was it more shocking to see Duke squander its lead against Houston, or was it the 10.6% drop in the Morningstar US Market Index following the announcement of tariffs by Trump? Which comeback was more thrilling: Florida overcoming a 12-point deficit to win or the market’s near 10% rally after a tariff “pause”? If we’re playing hypotheticals, could Nvidia (NVDA) be considered the star player of this market?
I’ll admit, watching college basketball has been more exhilarating lately. Perhaps it’s because my alma mater, Michigan, was eliminated early, or maybe it’s because I have less at stake—neither my retirement savings nor my kids’ college tuitions are tied to the unpredictable swings of the market.
Understanding Market Volatility: A Historical Perspective
In searching for clarity in this chaotic environment, I turned to the numbers. How frequently do extreme market days occur, and what underpins these occurrences?
Big Days Come in Big Years—Sometimes
Analyzing over 30 years of daily returns from the Morningstar US Market Index, which represents 97% of stock market capitalization, reveals a surprising reality: only 43 days saw gains or losses exceeding 5%. Considering there have been more than 7,500 trading days since April 1995, this rarity underscores the unique nature of market volatility. Remarkably, three of these big days occurred in April 2025 alone.
Out of those 43 days, 19 were positive, while 24 were negative. It’s not atypical for extreme movements to emerge during bear markets—a notable example being the bursting of the dot-com bubble in 2000 or the 2008 financial crisis. Yet, I discovered that many large rallies coincided with tumultuous periods when investors believed too much panic had set in.
Furthermore, it’s essential to recognize that even in downturn years, markets can rebound swiftly. For instance, after the “pandemic panic” of March 16, 2020, which saw a sharp 12.3% decline, the Morningstar US Market Index finished the year with an impressive 21% gain, largely thanks to extensive fiscal and monetary stimulus.
Trends and Anomalies: Extreme Days of Movement
Market events of August 8, 2011, when stocks plummeted nearly 7% due to a downgrade in the U.S. credit rating, serve to remind us that substantial market declines can occur outside of continuous bear markets. Even with those dramatic dips, the Morningstar US Market Index managed to end 2011 slightly in the green.
Recognizing Patterns: The Importance of Patience
As we dissect these market statistics, it’s critical not to overlook the big picture. Volatility can be unsettling, but history often reveals a pattern of recovery. Bouncing back from the turmoil of previous years is a testament to market resilience—the continuous upward trajectory remains consistent. Indeed, market crashes, which may have seemed ominous in their time, usually become mere blips on the overall investment growth chart that trends ever higher.
Don’t Miss the Highs—Big and Small
As evidenced by April 9, 2025, significant market rebounds can feel unpredictable yet rewarding. Analyzing the 19 days where stocks surged more than 5% over the past three decades, it’s apparent that many of these days marked critical recoveries, often right after periods of substantial decline.
Staying anchored during such fluctuations is vital for long-term success. Jumping in and out of stocks can lead to missing out on these unforeseen gains. In fact, the majority of stock market growth can be attributed to the compounding effect of smaller, consistent gains—evidenced in 2023 and 2024, where 0 days saw market swings of +/- 5%, yet the index achieved a strong 25% gain for both years.
The Long Game: A Different Mindset
Investing dramatically diverges from the world of college basketball, where each possession counts in a tight game. In the stock market, the focus should rest on long-term achievements over daily fluctuations. A 5% drop may provoke unease, but viewed through the lens of a 10-year investment horizon, it may not pose a significant threat to your ultimate financial objectives.
Research from Morningstar shows that investors who trade less frequently often achieve superior results. So, while it may be tempting to fixate on daily changes, consider redirecting that energy to enjoy the upcoming NBA playoffs—after all, my Chicago Bulls play tonight!
In summary, as we navigate the unpredictability of market movements—just like a thrilling sports tournament—it’s essential to remember that volatility is just one part of the journey. Let resilience and patience guide your investment strategy, enabling you to remain focused on the bigger, long-term rewards.
