After what feels like nearly a year of markets going straight up, even a modest pullback can feel like a personal hit.

One week you’re checking your account balances with a little extra confidence. And then the next week, when risk assets are sliding and headlines are loud it can feel like the mood shifts fast, right?

So here’s the real question: Should you be worried about market volatility, or should you be expecting it?

Why volatility feels worse after a long rally

Well, while I can tell you that market volatility is a natural part of any market cycle, you’re likely to feel differently these days.

That’s because when markets grind higher for months, we get used to it. That steady climb starts to feel normal and it starts to feel earned.

And when the market finally takes a breather, it can like something broke and make you want to put your money into something “safe”.

The fact is, however, that markets do not move up in a straight line, even when the market and economic backdrop is strong. To be sure, routine pullbacks are part of healthy markets, and part of what keeps longer-term uptrends from overheating.

Even so, minor pullbacks could feel like a sign of a bigger impending move for some individuals.

So, what do you do if you’re feeling this way?

Well, the first step is a simple reframe.

Why this pullback feels different: AI disruption and shifting leadership

Indeed, one reason this bout of volatility feels so intense is that it isn’t only about prices. It’s also about narratives, or the stories that drive market behavior.

Lately, markets have been reacting sharply to AI-related news, including concerns that rapid innovation and shifting leadership can pressure yesterday’s winners and accelerate competitive disruption.

For example, law professionals used to rely on expensive software to give them an edge in their practice. Today, AI can do what the attorneys and software do at a fraction of the cost.

This matters because investors often underestimate how quickly a “winner” stock can turn into a “why is this selling off?”

Because here’s the thing: AI is not merely a theme. It’s a force that can reshape profit pools.

What seemed like an mere augment to business processes is now demonstrating, in real-time, how quickly the innovation can displace earnings potential in more legacy parts of the tech industry.

And when that happens, the market rarely reprices politely over years. More often, it reprices in weeks. And that volatility is what we’re seeing today.

So yes, news about AI being disruptive, including to seasoned incumbents, can absolutely be a catalyst for volatility. The risk is not that the AI story disappears.

The risk is that markets get ahead of themselves, timelines disappoint, competition shows up faster than expected, and leadership rotates while investors are still anchored to the last set of winners.

Nevertheless, time and time again, markets have shown how quickly sentiment can change when the market decides the future arrived sooner than expected.

Markets participation is broadening, and that’s not a bad thing

There’s another dynamic worth paying attention to and that’s that market participation is broadening, even as the overall indices chops around.

In other words, it isn’t just the same ten stocks pushing the markets higher. Lately, investors are paying more attention to broader areas of the market, which is a theme we’ve highlighted in recent months, including meaningful moves in small caps.

Now, broadening isn’t a bad thing because it can be a sign of a healthier market structure. But, it does comes with a tradeoff.

That’s because when leadership rotates and participation broadens, dispersion increases. In other words, some sectors rally while others stall out or drop. And this increased disparity can make the market feel more volatile even if the index level does not look dramatic.

So, if you’re looking at your portfolio and thinking, “Why does this feel worse than the headlines suggest?” it’s because the market movements more uneven these days.

The cycle is later, but that does not mean recession is imminent

Another reason we’re likely seeing more market volatility is that we’re likely later in the economic cycle.

Indeed, the latest read on fourth quarter GDP and softening labor market data suggest that economic growth is slowing. This is leading to more economic surprises and frankly, markets are more sensitive to surprises than they were earlier in the cycle.

But “late cycle” does not automatically mean “recession is imminent.”

To be sure, in one of our previous reports, we described an environment where growth remained positive even as the economy softened, with the narrative focused on slowing without slipping into recession.

We have also framed the current data backdrop as modest economic growth, while acknowledging that policy mistakes could change the path.

So yes, the cycle is later.

But the base case is still slower growth, not collapse.

How often does volatility happen?

So then, should we be worried about volatility?

Well, once you understand the frequency of market moves, you’re more likely to stop treating volatility like an emergency.

Because the fact of the matter is that pullbacks happen a lot.

Indeed, in our published work last year, we noted that market dips around 3% have historically happened about seven times per year on average, and declines of 5% or more occur roughly three times annually.

That didn’t happen in 2025.

So, if you’ve felt like you’ve been living through a year with no pullbacks, you’ve been waiting for something that simply feels like it does not show up very often.

Zoom out even further and the point gets even clearer.

For example, in our 2Q25 market update, we shared that since 1928 the S&P 500 has experienced an intra-year decline of at least 5% in the vast majority of calendar years, with the median intra-year drop around 13%.

So volatility is not rare, it’s routine.

The truth is that big down days are rarer, but they still get the headlines.

And that’s the trap, isn’t it?

The scary days are memorable. The normal days are forgettable. And the market uses that to mess with your confidence.

Because the truth is that corrections are not an “if,” they’re a “when.”

When it comes down to it, some investors like a clean framework like, “Markets are due for corrections every 18 to 24 months.”

Whether you like that cadence or not, the core conclusion holds either way.

Smaller pullbacks happen multiple times per year. And, history has shown that a 5% drawdown typically happens in almost every calendar year.

So the takeaway is straightforward: Corrections are not an “if,” they’re a “when.”

What do we do when uncertainty shows up?

So what should you do when market volatility picks up? Well, this is where most investors go wrong.

They spend most of their energy trying to predict what happens next instead of focusing on what they control.

And the one thing you can control is whether you react or respond.

#1: Stick to Your Discipline

Because in moments like this, the winning move is often boring. It’s about sticking to a disciplined investment strategy.

It’s staying diversified.

It’s staying committed to a process built for markets that occasionally misbehave. It’s dollar cost averaging into your portfolio and rebalancing  regardless of what the markets are doing.

It’s a point we have made consistently in our updates, including the idea that trying to sidestep volatility through timing can mean missing the best days in the markets, potentially costing you thousands, while staying invested gives compounding room to work.

#2: Review Your Cash Management Process

The other thing you can control is whether you are forced to sell investments at an inopportune time.

That’s where cash management comes in.

The simplest way to avoid panic-selling is to remove the need to sell. Indeed, over the years, we’ve reinforced the use of a cash as a buffer to help you avoid selling at the wrong time, and holding cash reserve ranges that are often appropriate depending on whether you’re working or approaching retirement.

It’s about creating your “sleep-well number,” or the level of cash that lets you stay committed to your strategy when headlines get uncomfortable.

#3: Stick to Your Plan

And finally, you can control how well you’re sticking to your broader financial plan when markets start to feel uncontrollable.

Keep doing the work outlined in your plan, because we’ve already planned for moments like these.

In the short term, markets can feel like a voting machine. In the long term, they act more like a weighing machine.

Pullbacks help reset expectations, cool overheated parts of the market, and set the stage for future gains.

Historically, markets have recovered over time, even through major crises.

So the question is not, “Will this feel uncomfortable?”

It will.

The better question is, “Do I have a plan that assumes discomfort shows up from time to time?”

Bottom line

Should you be worried about market volatility?

Not if you’re prepared for it.

Because the fact is that volatility l is not a surprise guest, it’s part of the ticket to achieving your long-term goals.

So if you’re feeling unsettled right now, then it’s time to get back to the basics. That involves staying disciplined, knowing your sleep-well cash number and keeping your focus on the long-term plan.

That’s how you move through uncertainty without letting it drive the bus.