An Update on Market Volatility
When markets turn turbulent, your questions start coming in fast. Market volatility and equity compensation make it more complicated. Over the years I’ve heard versions of the same responses from clients during rough stretches:
“Am I going to lose all my money?” “Do you think we’re heading into a recession?” “I’m not worried — just more curious.” “Can’t control it. Not selling.” “Ignoring it all.”
There’s always a wide range — from genuinely frightened to entirely unbothered. Both reactions are understandable, and both carry risks.
Market Volatility Is Normal — Permanent Decisions Are Not
Market volatility happens regularly. What makes those periods dangerous isn’t the volatility itself — it’s the permanent financial mistakes people make in response to a temporary feeling.
Your dreams, financial goals, and long-term needs don’t change because the market drops 15% in a quarter. Your investment strategy shouldn’t either.
This matters especially for tech employees managing equity compensation. When your RSUs are vesting into a declining market, or your stock options are sitting underwater, the instinct to do something — sell, stop contributing, pause your ESPP — can feel overwhelming. In most cases, that instinct is worth resisting.
What History Actually Shows
Rough starts to investing years are not unusual. The table below shows some of the worst January-to-May stretches in market history, alongside what happened for the rest of those same years:
| Rank | Year | Event | Jan 1st - May 20th Return | May 21st - Dec 31st Return |
|---|---|---|---|---|
| 1 | 1932 | Great Depression | -35.8% | 32.8% |
| 2 | 1940 | World War II | -26.5% | 15.5% |
| 3 | 1970 | Vietnam War | -21.5% | 27.5% |
| 4 | 2022 | Current | -17.3% | -0.8% |
| 5 | 1962 | Kennedy Slide | -15.3% | 4.1% |
| 6 | 1939 | World War II | -13.0% | 9.0% |
| 7 | 1941 | World War II | -10.8% | -7.9% |
| 8 | 1973 | Oil Shock | -9.2% | -9.0% |
| 9 | 1974 | OPEC Embargo | -9.2% | -22.6% |
| 10 | 1931 | Great Depression | -9.1% | -41.8% |
| Source: JP Morgan |
The pattern is uneven — some years recovered strongly, others didn’t. But the consistent lesson isn’t that markets always bounce back quickly. It’s that investors who abandoned their positions in the first half of those years often missed the recoveries entirely, and those who stayed invested in the years that continued lower were still better positioned for the long-term recovery that followed.
The Real Cost of Trying to Time the Market
Looking at the 31-year period from 1990 through 2020, the data on market timing is unambiguous.
If you had missed just the five best days in the market over that entire period, you would have given up 37% of your total return compared to simply staying invested. If you had missed the top 25 best days — fewer than 1% of all trading days — you would have sacrificed nearly 80% of your potential gains.
Put in dollar terms: $1 invested and left alone from 1990 to 2020 grew to $20.45. That same $1, if it missed the 25 best days, grew to only $4.38.
There is no reliable way to know in advance when those best days will occur. History shows they often happen in the middle of, or immediately following, the worst periods of volatility — exactly when investors are most tempted to move to cash.
What This Means for Your RSUs and Stock Options
For tech employees, market volatility and equity compensation create specific sets of decisions that generic investing advice doesn’t address:
- RSUs vesting in a downturn: Shares vesting at a lower price means a lower tax bill at vesting — which can actually be advantageous. Selling immediately still removes concentration risk regardless of where the price is.
- Underwater stock options: A decline doesn’t necessarily mean your options are permanently worthless. Understanding your expiration timeline and the company’s long-term trajectory matters more than the current price.
- ESPP during a downturn: Continuing to contribute to your ESPP during a market decline means purchasing shares at a discounted price relative to an already-reduced market price — often one of the better risk-adjusted opportunities available to employees.
- Concentrated stock positions: A downturn can feel like the wrong time to diversify, but for employees with large concentrated positions, the calculus around risk doesn’t change because of short-term price movements.
Stay Invested and Stay Focused on the Long Term
The companies where many tech employees work continue to invest in talent, develop new products, and build businesses designed to outlast any given economic cycle. The long-term case for staying invested doesn’t disappear during a difficult quarter or year.
If you’re feeling anxious about your portfolio, your equity compensation, or how a market downturn affects your financial plan, the most useful thing you can do is talk it through with me — not make a reactive decision alone.