Why You Should Always Prepare for Volatility Ahead
Ken Fisher discusses stock market volatility in the context of the Iranian war's market impact, explaining that a less-than-10% decline is considered normal noise rather than a correction. He argues that volatility is always a high-probability event in any time frame and advises perpetual preparedness. Fisher also shares his 2026 market forecast, predicting a sideways first half and a stronger advance in the second half.
Summary
Ken Fisher opens by contextualizing the market impact of the Iranian war, noting that while it caused a notable downdraft, it fell short of being classified as a formal stock market correction. He outlines the standard definitions: a decline of 0-10% is considered normal volatility and noise, a decline of 10-20% is a correction, and a decline exceeding 20% with extended duration constitutes a bear market. The Iranian war's impact fell into that first, less severe category.
Fisher then broadens the discussion to the nature of stock market volatility itself, emphasizing that volatility is a routine and expected feature of equity markets. He frames volatility as a two-sided phenomenon — upward moves are 'pleasant volatility' while downward moves are 'unpleasant volatility' — but both are simply expressions of the same underlying characteristic of stocks.
He goes on to note that market drops can be triggered by real events, stories not connected to actual events, or entirely fabricated fears with no basis in reality. Because the timing of these drops is unpredictable, Fisher argues that investors should always maintain a state of preparedness for volatility rather than trying to anticipate specific downturns.
Finally, Fisher shares his market forecast for 2026, predicting that the first half of the year will be characterized by a begrudging, sideways, pulsating market without significant upward or downward movement — a description he says has matched what has occurred so far. He expresses belief that the back half of the year will deliver a more meaningful market advance, though he acknowledges uncertainty about the precise path forward.
Key Insights
- Fisher defines three tiers of market decline: a drop of less than 10% is considered normal noise, 10-20% is a correction, and over 20% with extended duration is a bear market — and the Iranian war's market impact fell into the first, least severe category.
- Fisher argues that volatility is not abnormal but 'pretty darn routine,' and that regardless of the time frame chosen, volatility is a high-probability outcome in all of them.
- Fisher reframes volatility as a two-sided coin, asserting that rising markets are simply 'volatility of the pleasant kind' while falling markets are 'volatility of the unpleasant kind' — both being expressions of the same stock market characteristic.
- Fisher claims that market corrections can be caused not just by real events, but also by stories disconnected from actual events or by 'phony baloney fears that aren't real,' making the timing of drops fundamentally unpredictable.
- Fisher's 2026 forecast calls for the first half of the year to be a 'begrudging, sideways-entrenching, pulsating but not big up or big down move' market, with a nicer advance expected in the back half of the year.
Topics
Transcript
[0:05] So, the Iranian war, as you know, created a downdraft in the market that was not quite big enough to be classified as a normal stock market correction. Normally, a correction is thought of as a decline in the broad market indexes of more than 10% but less than 20%, whereas a decline of more than 20% with some extended duration is considered a bear market. A decline of nothing to -10%, a less than 10% decline, is just thought of as normal short-term volatility and noise. [0:38] And that's what the Iranian war generated— almost a correction, but no cigar. Now, the fact is, having volatility like that is not abnormal. It's pretty darn routine. Stocks are volatile.…
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