And some days these gains and losses can seem quite dramatic. Many of us pay a lot of attention to the daily and even hourly news reports of the market's direction. After all, those numbers reflect the changing values of our own investments. But there's a lot more to market volatility than just what you'll hear on the evening news.
Many different factors cause volatility.
The rates of inflation and interest, employment levels, corporate earnings reports, and political events around the globe can all impact the direction of the market, and none of them are easy to predict in advance. But that's the short-term story. If you step back and look at the daily and yearly ups and down in the market with a long-term perspective, then a predictable pattern emerges. Its worst single year since 1926 was 1931, when it lost about 43 percent. Its best year was 1933, when it gained over 54 percent.