3 risks that could spark market volatility in 2024

Market volatility within the S&P 500 (^GSPC), as measured by the Volatility Index (^VIX), has remained subdued throughout 2024. However, with looming uncertainties surrounding the upcoming election, potential Federal Reserve rate cuts, and other factors, investors are questioning what level of volatility may lie ahead. Anthony Saccaro, President of Providence Financial and Insurance Services, joins "Wealth!" to offer his insights.

Saccaro emphasizes that investors should focus on "the phase of life that you're in," advocating for tailored strategies based on individual life stages. Regarding retirement planning, he advises that older individuals nearing retirement should consider shifting their approach, given the current record-high markets. He recommends transitioning from a "growth first, income second mentality to an income first, growth second mentality."

Looking ahead to the second half of the year, Saccaro highlights three key risks for investors to monitor: persistent inflation concerns, recession fears, and geopolitical risks and their potential market impacts.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Angel Smith

Video transcript

One popular measure of volatility for investors has been relatively subdued over the past few months, the cboe volatility index known as the Vix is off more than 3% so far this year indicating expectations for volatility in the S and P 500 have been somewhat muted this year.

Some on Wall Street believe that that's about to change though, as uncertainty around the fed's potential rate cuts plus a presidential and general election could see market volatility spike for more.

I'm joined by Anthony Sarro, who is the Providence Financial and Insurance Services President Anthony.

Great to see you and great to have you back on the program.

What are the best ways to protect oneself against the potential market downturn?

Yeah, I think what you really want to do is you really want to focus on the phase of life that you're in and the strategies that you're using for that phase of life.

The fact is that if you're heading towards retirement and you have more than 10 years away to retire, uh you should continue doing what you're doing.

Dollar cost averaging, have money come out of your paycheck every year.

Uh Every, every paycheck, every paycheck continue driving that average price down.

That's what dollar cost averaging does.

I wouldn't change anything there.

But if you're a little bit older, if you're maybe a decade or so, especially if you're five or 10 years or less away from retirement, you probably want to start shifting from the more aggressive investments which have, which have served you well over the last 10 or 12 years into more conservative income based investments.

And if you're retired, same thing, it, it starts shifting from a growth, first income, second mentality to an income, first growth, second mentality, the closer you get to retirement, I think that's the number one thing you need to do with the market at record highs.

It's not a bad time to start making that shift.

So, what are the three risks in the back half of 2024 that investors should be paying closest attention to that could insert more volatility into the equation?

Yeah.

Well, certainly inflation is one of those risks.

Um, you know, it has softened, it has started to come down a little bit.

It stalled in the first quarter came down a little bit.

Right.

The PC and CP I numbers were favorable not by a lot, but we'll take it.

Um, and that's certainly one risk that the price of things stays high that makes it more expensive to live, makes it more expensive for credit, makes housing costs more expensive.

Uh So that's one risk for sure.

A, a second risk is that we have a recession.

We're not out of the woods yet.

Um The labor market is softening.

It's not soft enough.

The uh inflation as we talked about is softening, still not soft enough.

We still have an inverted yield curve and inverted yield curve indicates and and has indicated historically that we have a recession coming that our, our yield curve now has been inverted for more than two years.

That's not uncommon for an inverted yield curve to be that inverted that long before recession happens.

Additionally, the expectations index uh is under 80 generally under 80 has been a good predictor of recession.

So we're not out of the woods.

A recession is potentially a risk as well too.

And I think geopolitical risks are there as well.

The trade tensions with China, the tariffs, the presidential election is going to come into that and we can't underestimate still the fact that there could be a terrorist event.

We've had it happen before our government has done a great job of protecting us, but we've got some wars going on and if we had another terrorist event in this country, uh that could be a risk as well too.

So I think those three are the three to really focus on and to, to do what you can to mitigate at this point.

Wow.

Yeah, that last one wasn't on my bingo card and I'm hoping it doesn't come true, but of course, uh, exogenous threat that, uh, many investors always have to think about here.