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Market Volatility Is Surging. Longer-Term Investors Should Buy Now.

Volatility has recently emerged to tear through the stock market. If history is any guide—and this time could be different—the next year will be one with solid gains.

The


CBOE Volatility Index


(VIX), which measures expected market volatility, has risen to about 29. That’s up from just about 19 in mid-August, the low point for the second half of this year. Unsurprisingly, the


S&P 500


has fallen just over 12% from its second-half high from that point as volatility picked up. The root of the issue is that the high rate of inflation is not declining as fast as Wall Street had expected. That prompted the Federal Reserve to forecast a higher peak federal-funds rate, a short-term interest rate, than previously anticipated. Higher rates are meant to squelch inflation by reducing economic demand. To be sure, the Vix has tended to top out at right around this level since the end of 2021, and it has flatlined this week.

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