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Investing Specialists

Poll: What the Market Volatility Is Telling Investors

Morningstar.com readers weigh in: Is this year's downdraft a buying opportunity, signal of a coming recession, or noise to tune out?

The first opinion poll dates back to 1824, when The Harrisburg Pennsylvanian conducted a straw poll for the Andrew Jackson/John Quincy Adams presidential race. Since then, opinion polls have expanded beyond politics. Today, polls inquire about our personal habits (Do you sleep enough? Is stress consuming your life? Which Lay's potato chip flavor is your favorite?), our work (How many hours do you spend at work each week? How many messages are in your inbox right now?), and our play (Can the Chicago Cubs win the World Series this year? Will Leonardo DiCaprio get the Oscar for best actor?).

Here at Morningstar.com, we decided to conduct our own poll, focusing on what our readers think about this year's market turmoil. We asked whether the sell-off this year was a buying opportunity, a signal of a coming recession, or noise that readers were tuning out.

Nearly two thirds of voters said the sell-off was simply noise to tune out. Twenty-one percent said the volatility was a buying opportunity. And only 13% think the market's recent fluctuations signal a coming recession.

To read the complete thread or to join the conversation, please click here.

Noise to Tune Out
Several readers who cast their vote for "noise" did so because they are in it for the long haul. "As a long-term investor, I have to look at this sell-off in the market as simply noise," writes seaside1. "I've been through this type of cycle before and have always managed to financially prosper over the long haul." Retiredgary agrees: "We own what we think is an appropriate amount of equities and try to look at the long term."

Other readers are tuning out what's going on in the market due to where they are in life. "If I was 15 or 20 years younger, I'd consider this a buying situation," admits Chief K. "But once I started drawing Social Security benefits, I decided to focus more on preservation of my gains than on reaching for more." If the market gets close to its 2008 levels, though, Chief K says, "'screaming bargains' would be hard to ignore."

And some investors who voted for "noise" left the door open for "opportunity" down the road. "I've got a shopping list for stocks and funds that I will buy as opportunity presents, which is part of my ongoing plan," says rforno. "With multiple decades ahead of me, I'm taking my time in accumulating quality (to me) stuff that lets me sleep well at night, even if a recession may be looming."

Buying Opportunity
Some Morningstar.com readers are buying on the market's weakness. "With the U.S. economy in such good shape, it is a buying opportunity for U.S. stocks," writes fastball. "For the rest of the world, all bets are off, however."

"I'm seeing more and more great entry points in individual companies, preferably with wide moats, great management, strong balance sheets, and so on," says Matthew9. "I like the healthcare sector as much as any individual sector and believe many great companies here are on sale." Ashvij agrees. "I've had some cash for investing since last year," Ashvij writes. "Buying on market dips in funds on my watchlist."

A Coming Recession
Those readers bracing for a recession are in the minority. OnTarget notes that the past often repeats itself. "For example, right now the seven-year business cycle is ending. Plus, as the Fed tightens rates, the markets have typically moved into a recession. Why should this time be any different?"

Others say a confluence of factors leads them to think a recession is immanent. "The sell-off is a signal of a coming global recession," believes SteadyEddy. "Too many risks in play: oil-price decline (no end in sight); earnings deceleration in the U.S.; European banks financial stress (no clarity there); and widening negative interest rate policies including acknowledgement of the U.S. Fed being open to it."

All, Some, or None of the Above
Many responders didn't vote for one of just our three options. "I'll check one and three: buying opportunity or noise," says alibai. "I still have faith in the U.S. economy and the U.S. stock market."

"All three," writes Nittwit, who has been adding dividend-paying U.S. stocks. At the same time, Nittwit limits the amount of cash being put to work, concerned about central-bank policies around the globe and "currency wars." And with the intraday noise in the market, timing an individual purchase can be a challenge. "The trend is bear, and with the exception of purchase timing, I tune the noise out."

Others chose the opposite. "I'll have to go with 'none of the above,'" says mwleach. This reader has been buying a little but remains overweight in cash, doesn't see supporting evidence of a coming recession, and yet isn't tuning out the noise. "I think we're still in the early stages of a cyclical bear market that has a way left to run, both in time and distance."

BMWLover also refrained from voting but, like mwleach, expects more volatility ahead: "At some point it will be a buying opportunity, but I don't think that will be for a while. The global economy still has too many 'ifs' in it for the markets to be ready to take off. I think we'll be bouncing around here for some time, and then maybe at some point we'll get a washout and it will then be off to the races."