This summer, the Dow Jones Industrial Average fell more than 1000 points, and the S&P 500 fell 3%. The CBOE Volatility Index (VIX) spiked to above 65, rivaling the highs of the financial crisis of 2008 and seen again at the start of the COVID-19 pandemic, according to Barron’s. Only two weeks later, the markets seemingly turned a corner, and the VIX plunged over 50 points and closed at 14.65, marking its fastest-ever retreat.
These statistics tell a story of a dynamic global stock market that has experienced long-term growth, marked by unpredictable swings and sudden knee-jerk reactions. Tough markets cause investors to think critically about volatility and the potential opportunities they hold.
William Blair’s professionals explore the risks and opportunities that accompany turbulent markets and recognize that each client may react differently to volatility and needs unique solutions. Hear directly from William Blair’s global business heads on how their teams act as trusted advisors through all market environments.
Stephanie Braming, CFA, Global Head of Investment Management
As investors, it’s important to understand the key drivers of market volatility and our environment, as well as how the volatility affects country, industry, and company growth expectations and valuations. When volatility strikes, there’s generally little discrimination, providing an opportunity for investors. Our investment teams’ experience, fundamental research focus, and macroeconomic understanding are critical to assessing if price action is transient and where—if at all—we should change portfolio positioning.
From a client perspective, we proactively discuss market volatility and its drivers, our perspective, and how we’re positioning portfolios for the short- and long-term. This engagement drives broader client discussions about risk tolerance and market opportunity, which enhances our partnership with our clients and allows us to better meet their needs.
Ryan DeVore, Head of Private Wealth Management
No one enjoys turbulence on an airplane or volatility in their portfolios, yet clients experience both on their paths to where they want to go. Volatility and turbulence are unnerving, and loss aversion becomes the psychological reality. American investor Peter Lynch famously said, “The real key to making money in stocks is not to get scared out of them,” and this has proved historically accurate. Stewarding capital for our clients, we focus on the long-term—in all asset classes, including stocks—but in periods of volatility, our mission is immediate and requires two major considerations. First, advisors use disruption to reevaluate the businesses (or money managers) they own as investments for our clients, to confirm their conviction or explore new opportunities, as opportunities often arise in times of disruption. Second, we balance the risk that clients need to grow their assets against what they can emotionally accept. Nerves are real, and if a client struggles with market and monetary variation, it is our job to balance this dynamic with them.
John Kreger, Director of Research
In Research, we view periods of increased market volatility as a time when our clients need us the most. We lean into this by helping them spot dislocations. We think about best practices along two dimensions.
First, each analyst strives to be vocal for our clients by thinking about how volatility impacts the fundamentals of their coverage and how it translates into underlying changes in earnings power and cash flow. Our team highlights moments when investors with longer-term time horizons can take advantage of potential opportunities. Second, we produce research commentary in response to market volatility, hoping it adds value for clients in turbulent times. One example is July’s Monthly Macro, which highlights inflation’s continued downward trajectory, the recent market rotation toward small-cap stocks, and retail sales reports. A second example digs into ongoing volatility, the intensifying U.S. election, and pivotal Federal Reserve updates, shown in August’s Monthly Macro.
Scott McLaughlin, Head of Equities
Our clients face significant challenges due to market volatility, which increases their need for our services. Economic data releases, corporate earnings, and geopolitical events are the most common reasons for market volatility. All of these events can impact the earnings power and stock prices of the companies we research.
Our sales and trading teams are critical to our clients during highly volatile periods. Our sales professionals relay important investment advice in real-time as markets dislocate, helping our clients make important buy and sell decisions. Clients look at our trading desk as expert liquidity consultants who understand their unique benchmarks and needs, specifically in times of volatility. William Blair is a critical counterparty for clients in all types of markets, and our team is committed to delivering the highest level of service.
Matthew Zimmer, Global Head of Investment Banking
We stay in constant communication with our clients, offering perspectives on their industry, as well as the broader capital markets and M&A activity. These close lines of communication provide us with the opportunity to employ a long-term focus and balanced perspective—made possible by our private partnership structure—in which we feel comfortable saying, “Now is not the time to do this deal.” As a result, our clients know they can come to us for objective and insightful views and an enduring approach that makes William Blair a trusted advisor, regardless of the market environment.
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As financial markets evolve, William Blair remains committed to guiding our clients through complex and dynamic times. Our strategic position allows us to leverage ongoing trends to best ensure investments are in a strong position to grow, and we look forward to focusing on our clients and their needs.