Recent equity market returns have been robust and volatility for the most part has been quite calm for the past few months. Over time, stock markets have had their ups and down and have been more volatile these recent months. History has shown that volatility spikes and market downturns can happen unexpectedly.
That is why it is important to develop an appropriate asset allocation and to have reasonable expectations to help weather market downturns. On average, a global stock market downturn of at least 20% occurs about every seven to eight years. The last occurrence in 2011. During periods when equity markets fall, a well-designed allocation to fixed income can help mitigate the declines at the overall portfolio level.
Calm markets give you the opportunity to review your expectations and possibly reset your portfolio to weather a significant decline in the event one occurs. Now would be a great time to review your own asset allocation to be sure it is right for your risk and return objectives.