Market Volatility Offers Strategic Opportunity for Patient Investors, Historical Trends Suggest

Key Points

• Ever since he became Fed chair, investors seem more focused on Kevin Warsh’s words than anything else in the market.

• The AI trade has made investors in these stocks lots of money, but the durability of the boom is unknown.

• Investors who are aggressive and buy dips can boost their portfolio returns.

• 10 stocks we like better than S&P 500 Index

Being a stock market investor can be a lucrative endeavor. The proof is in the pudding.

As of Aug. 28, the S&P 500 index (SNPINDEX: ^GSPC) has risen by 13% in 2026. This follows a gain of 16% in 2025, 23% in 2024, and 24% in 2023. Should the benchmark keep up the momentum this year, it will be another double-digit increase. This hot streak signals that it pays to be bullish.

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It seems that all is well in the land of public equities, based purely on the performance metrics. But if you even remotely pay attention to the headlines, you know that not all investors are full of confidence and optimism. There’s a level of uncertainty creating a shadow over the stock market, caused by a small number of factors.

Selling your stocks is a natural way to respond. However, history says that the uncertain environment is actually good news for long-term investors.

Image source: Getty Images.

What are you worried about?

To be clear, I believe the market and economy are always in some state of uncertainty. Said differently, there’s never a point when an investor would claim a high level of certainty about where asset prices or interest rates, for example, are headed. These things are simply unpredictable.

That being said, there are two chief variables that I believe are causing the most fear, uncertainty, and doubt in the stock market these days.

The Federal Reserve is the first point of uncertainty. In May, Kevin Warsh replaced Jerome Powell as the chair of the central bank. And investors have been intensely focused on trying to figure out what his approach will be when it comes to running the Fed and handling monetary policy. His words are closely scrutinized. His views on inflation and interest rates are incredibly important to market participants and their decisions.

He has mentioned that fighting stubborn inflationary pressures is a priority. And he’s hinted that the central bank may need to raise the fed funds rate before the year comes to a close. Investors don’t know the timing or magnitude, so it makes them a bit uneasy.

The artificial intelligence (AI) build-out is another development that causes uncertainty. While stocks sitting at the center of this unprecedented boom have generally registered huge returns, investors have no clue how things will play out. And now that AI spending is having a material impact on the market and the economy, it’s logical to ask whether the music will stop playing. The question centers on the durability of the AI secular trend.

The “Magnificent Seven” stocks make up about one-third of the entire S&P 500 index, according to research from The Motley Fool. These businesses are heavily exposed to the AI craze. Any slowdown with their financial metrics could snowball into panic among the investment community. This would undoubtedly pressure the overall market.

Stay bullish

Despite the S&P 500 index’s persistent climb higher, Kevin Warsh and the AI trade support FUD in the minds of investors. But this doesn’t mean that being bearish is the right perspective. In fact, investors are better served by always remaining bullish, whether FUD is at extreme levels or when it’s more muted.

The S&P 500 index’s historical track record proves that optimistic investors, especially those who think in terms of several years and decades, are rewarded. This doesn’t mean that there won’t be the occasional correction or bear market. These are normal.

However, they shouldn’t discourage you from continuing to put money to work. And if uncertainty gets to a point that it causes stock prices to crash, it’s a good time to be aggressive. Being opportunistic and buying the dips can boost your portfolio returns.

Should you buy stock in S&P 500 Index right now?

Before you buy stock in S&P 500 Index, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and S&P 500 Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $440,710!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!*

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See the 10 stocks »

*Stock Advisor returns as of August 31, 2026.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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