Market Volatility and the Importance of Showing Conviction

After a year of record-low volatility in 2017, the sudden spike in trading activity is a good reminder for portfolio and fund managers that it’s important to develop a plan to communicate to clients and the media during periods of market uncertainty.

It’s also a reminder that, just as volatility is an opportunity for investment professionals, so it is for financial public relations professionals.

In the first ten days of February 2018, the Dow Jones Industrial Average traveled a cumulative 22,000 points in intraday trading. Wall Street’s fear gauge, the CBOE Volatility Index, or VIX, briefly went over 50—its highest point since China’s devaluation of the yuan in 2015.

Wall Street watchers, as well as individual investors with their retirement nests in the equities markets, were glued to the television and devouring the latest reactions from journalists, analysts, and CEOs alike.

Often times investment managers, including several of our clients, are inclined to steer clear of the media because they want to avoid making a comment that could possibly spook already anxious investors.

We believe this strategy is wrong.

We encourage our clients to think differently—to consider an appearance in a broadcast segment, a quote in the financial press, or a direct email communication to clients and prospects. Down and volatile markets are opportunities to demonstrate that you are calm, collected, and that you haven’t lost any conviction in your long-term investment strategy. Going radio silent and staying below the proverbial “radar” can give the opposite impression.

The key to successfully engaging with the media during periods of market uncertainty is to strategically craft a message, stick to your talking points and demonstrate confidence and conviction. Needless to say, we were very busy at DLPR during this current round of heightened volatility.

Many of our clients were keen to point out that equity markets were overheated and that this correction was something many had seen coming for some time. Some clients argued that the fundamentals of the economy remain strong and the nine-year rally still had some room to run despite the volatility. Others felt that stock prices remain overvalued and there will be additional drops in the market once the Fed starts steadily increasing interest rates.

Generally speaking, for many of our active managers, volatility is an opportunity––price fluctuation is good for targeting and capitalizing on market dislocations. Purchasing stock in a solid company when prices are low allows fundamental portfolio managers to generate alpha for clients. For shorter-term momentum traders or technical managers, volatility is, in fact, the key to their success. Anticipating market movements through in-depth analysis can reap tremendous financial returns, especially in a frothy market environment that is coming out of a long period of low volatility.

When we help our asset and wealth management clients project confidence in the media, they inspire confidence among their investors. While fear and panic may make for more drama on television, a calm and strategic approach to a market correction can be a tremendous value-add for investment pros and their clients.  

By Liam Ben Zur


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