During bear markets, prices get suppressed by investors' negative expectations about companies' future earnings, which impacts their potential return from the stock.
However, investors can protect their capital during a sustained market downturn like this by hedging into safer asset classes and stable income-generating stocks.
While low volatility creates a sense of security for investors, high volatility can spread fear, uncertainty, and doubt (“FUD”) in the market, causing even seasoned traders to make irrational decisions.
Holding overly volatile stocks can create unnecessary psychological pressure during these periods. As a result, long-term investors may instead want to minimize their portfolio's vulnerability to volatility.
The U.S. is witnessing a serious price correction, with homes dipping 2.67% nationally in Q3 2022 – one of the sharpest drops since the 1940s. They fell again in Q4 2022.