Notes on Volatility

On the invasion of Ukraine

Most importantly, this is a humanitarian disaster and our thoughts are with the Ukrainian people.  We hope it can be solved with little bloodshed, but at this juncture it looks like a remote possibility. 

As far as the market impacts – we have seen historically, exogenous shocks like military conflicts tend not to have a lasting impact on the markets.  There is a negative initial reaction with a subsequent recovery in most of the cases.  Going back to 1940 the median downdraft was 2%, followed by a gain of 8% in the next 6 months, and over 20% in the subsequent year.  This is calculated as price returns on the Dow Jones Index (as it is long-running).

Source: BMO Nesbitt Burns


On interest rates

We are in a too accommodative interest rate environment right now.  It needs to become a bit tighter before damage is done to the economy.  It typically takes a long time to trigger a recession from the start of lifting rates to the time policy becomes too restrictive and  a recession unfolds (grey vertical bars).  Right now, things still look good but money is shifting to different sectors to adjust for changes in interest rates.


Source: Fidelity Investments


On COVID

I recently had a client email me that she has COVID and is getting through it thankfully.  




On equity market volatility

According to Haver Analytics, insiders of publicly traded corporations are buying into this market pullback as they have at other negative points in history.  Basically, in other points of market stress insiders have typically indicated a temporary bottom. example 03/11/09  Market dropped -44% and insiders were buying.  The old adage is that insiders will sell for many reasons, but they only buy for 1 reason – they feel their company offers compelling value.  Could we be close to a bottom in this pullback that has put the market on its heels so far in 2022? Time will tell. 







The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of BMO Nesbitt Burns Inc. ("BMO NBI"). Every effort has been made to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions that are accurate and complete. Information may be available to BMO NBI or its affiliates that is not reflected herein. However, neither the author nor BMO NBI makes any representation or warranty, express or implied, in respect thereof, takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. This report is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities. BMO NBI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. BMO NBI -will buy from or sell to customers securities of issuers mentioned herein on a principal basis. BMO NBI, its affiliates, officers, directors or employees may have a long or short position in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. BMO NBI or its affiliates may act as financial advisor and/or underwriter for the issuers mentioned herein and may receive remuneration for same. A significant lending relationship may exist between Bank of Montreal, or its affiliates, and certain of the issuers mentioned herein. BMO NBI is a wholly owned subsidiary of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Nesbitt Burns Corp. Member-Canadian Investor Protection Fund.