2020 started out as a relatively boring year, so far as the stock market goes. Seven weeks in, the market hadn't been particularly volatile, and just past the midpoint of February, the S&P 500 and Dow Jones Industrials were up 5.1% and 3.2% respectively. Nothing to write home about, but well on track to finish the year solidly up after a strong 2019. 

Things changed on Feb. 20, though nobody knew it at the time. Both the the S&P and Dow dropped, but only a modest 0.4% for both indexes, starting one of the most volatile periods in the past decade. In the 13 trading days since, the market has experienced the quickest double-digit decline in market history, falling more than 3% four times, and for two days it was up more than 4%. 

Just how volatile has it been? Any one of those four bad days would qualify as the worst day for stocks not just in 2020, but for all of last year, and the market hasn't come close to a day it gained more than 4% in a day in more than a year. But it happened twice this week. Yet even after two of the best market days in the past decade, the market is still down more than 8% to date, with far more very bad days than very good ones. 

Stock market trader on trading floor.

Image source: Getty Images.

Uncertainty and fear are holding the reins

There's no way to predict what the full economic impact of coronavirus will be, as COVID-19 cases spread around the world seemingly unabated. But there are already signs things could get worse before they get better. Global oil demand is predicted to fall in the first quarter for the first time in over a decade, mainly because of the impact of coronavirus on Chinese consumption, and OPEC is scrambling to slash output to stabilize a market in freefall. Goldman Sachs is already predicting corporate earnings for U.S. companies will fall this year.

World governments are taking big steps and committing billions of dollars to arrest the spread, and the U.S. Federal Reserve slashed interest rates this week to what are now the lowest levels on record in an effort to provide stimulus to the economy in the form of cheap capital. But it's going to take months before we can measure what, if any, impact these efforts will have to stabilize markets and accelerate efforts to get ahead of the spread of COVID-19. 

And in the meantime, markets will probably remain in some state of turmoil. The past three weeks have been some of the most volatile in the past decade, since the global economy started taking baby steps forward after the Great Recession. The lack of certainty will almost assuredly keep volatility high. 

Should you buy or sell?

There's little doubt that it's not easy keeping your emotions in check when the market is so volatile and we don't know what to expect. Barely a week after writing this, my family saw more than $80,000 in personal wealth evaporate during the first stage of the market's drop. 

For many people, experiencing that much lost wealth over such a short period of time is impossible to ignore, and the urge to do something to stop the losses is overpowering. That's doubly true when we see graphics that make the recent market decline look like this: 

^SPX Chart

^SPX data by YCharts

And the visual impact can make it feel as bad as this: 

^SPX Chart

^SPX data by YCharts

But when you look at the numbers on those two charts, note that the first one -- the ongoing market decline --- is a 12% drop, while the second chart is the nearly 60% decline stocks went through during the global financial crisis.

Let's take it one further and apply a touch of hindsight to things. Let's start by going back to the most recent big market drop:

^SPX Chart

^SPX data by YCharts

Even with the crazy trading sessions we have experienced the past few weeks, the market still has a way to go before falling as far as it did way back in ... 2018. That's right -- from October through late December 2018, the S&P 500 fell 20%. Needless to say, it recovered all of those losses and then some, and it's still up a little from the October peak. 

Now let's go a little further back -- all the way to October 2007, the market peak before the global financial crisis sent the world into the Great Recession. 

^SPX Chart

^SPX data by YCharts

That's right. Even from the pre-crash peak, stocks are still up almost 90% over the past dozen years and a few months. Moreover, when you look closer, you can see a lot of spots on the chart where stocks fell sharply. 

How many of those drops can you actually remember? Chances are, not very many, if any. 

Play your game, not the market

When markets get crazy, it is incredibly easy to lose focus on your goals and get caught up in the noise. But that's a mistake; you don't actually have to play the market's game, or beat other investors out when stocks are declining, or "get back in" at some perfect market bottom to build wealth. 

That's a losing game that nobody can win, not even the experts. The only way to consistently win as an investor in stocks is to treat them as what they are: ownership in a business. The market's recent madness isn't a condemnation of individual businesses, so much as the market making guesses what will happen in the next few months. 

Instead of getting caught up in a race for the exits that's likely to harm your wealth -- because it usually leaves people sitting on the sidelines when stocks recover -- a better approach is to keep some cash in your portfolio and start looking for opportunities to buy