Volatility has crept into the ASX share market in 2022, and there's been plenty of calamity from the fallout.
The standard deviation – a measure of volatility both up and down – of the S&P/ASX 200 Index (ASX: XJO) is at an annualised 16% this year to date, well above historical levels.
As a result, several sectors are pushing lower, while others are well up, with pockets of green and red littered throughout each corner of the market.
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Worried about the uncertainty? Think long-term
One important consideration is the current economic and investing cycle, Shane Oliver of AMP Capital says.
The economist says while there are plenty of setbacks in the ASX share market, over the long-term, growth assets like stocks continue to provide outsized returns.
"It's invariably the case that the share market leads the economic cycle (bottoming out before economic recovery is clear and topping out before an economic downturn has really hit and vice versa at the top) and that different assets perform relatively best at different phases in the cycle," he said to Livewire.
Such a mantra is important, Oliver says, because investment returns have proven to be smooth and consistent for the patient investor. That's despite an extensive list of "worries" that have kept more than a few on the sidelines.
"Australian economies have had plenty of worries over the last century, but it got over them with Australian shares returning 11.8% per annum since 1900, with a broad rising trend in the All Ords price index," he remarked.
Expanding on this school of thought, Oliver also mentioned:
Worries are normal around the economy and investment markets but most of them turn out to be no more than short-term noise.
Short-term share returns can sometimes see violent swings, but the longer the time horizon the greater the chance your investments will meet their goals. It's also extremely hard to time these short-term swings. So in investing, time is on your side and its best to invest for the long-term.
ASX shares have certainly shrugged off the wave of pressures in the past few years, even powering through geopolitical and global market tensions since trading resumed in 2022.
The benchmark recently powered back towards its all-time highs, with the All Ordinaries Index (ASX: XAO) and Australian small caps following suit.
