Stock Market Volatility 2026: Why Noise Misleads Investors

It is getting increasingly easier to speculate, and it seems we are becoming a society that loves doing it. It has reached the point where you may not even realize you are doing it.

 

The problem is noise. There is so much of it in the world today that you lose the ability to determine what is truly going on.

 

 

Volatility Can Be an Illusion

Here is a simple test. Using single-day market moves of 1% or more, would you consider 2026 to be more volatile than the last four years, the same, or less? Volatility is how many investors define risk — and right now, the perception of risk is being driven by noise, not data. According to Jason Zweig in the Wall Street Journal, we have experienced 40 days of 1% or more single-day swings so far this year. In 2023 and 2025, there were 49 moves of 1% or more and 63 in 2022. That would imply that this is just another normal year. Does it feel normal? The reason is noise.

Noise affects asset prices in the short term but has virtually no impact on long-term values. Headlines about oil prices, inflation, world events, and yes, politics leave the impression that markets have become more volatile and uncertain. The numbers say otherwise. When economic uncertainty appears to be higher, investors usually become cautious at best — yet we are at all-time highs in the stock market. This doesn’t reconcile with the noise we hear every day in the media.

AI stocks have become a poster child of this dynamic. Last year, large companies with significant exposure to AI would do nothing but trade higher. Microsoft is a good example of how market noise and underlying business performance have diverged.

Three years ago, Microsoft was at an all-time high and headed higher — and then declined by 13% in October of 2023. It recovered to another new all-time high but soon fell again, this time by over 20%. After regaining most of those losses, it proceeded to fall by another 30%. In mid-2025, it was off to the races, climbing from $355 to $555 in only a few short months. The next few months were not kind — the stock fell all the way back to about $355, a 35% decline. It has since recovered 20% from that collapse. All this volatility and drama for a company that has done nothing but perform.

Perception vs. Production: What Microsoft’s Fundamentals Actually Show

As of June 2023, Microsoft reported $212 billion in revenue and $72 billion in net income. The quarter that just ended in March 2026, which will be announced in the next few days, will likely show an annual run rate of revenue well over $300 billion and net income over $120 billion. The actual performance of Microsoft tells a completely different story from the daily expectations of investors. Cash returned to shareholders was approximately $42 billion in 2023 and has climbed to almost $50 billion in the last 12 months.

Microsoft is a clear example of the hazard of daily market perceptions versus what a company is actually producing. In a world of instant information, what you think gives you an advantage may be quietly turning you into a speculator. For long-term investors focused on dividend growth, the job is straightforward: determine if a company can grow and produce increasing streams of cash. The company then decides whether to pay all or part of it to you, the investor, or reinvest it back into the business. You must then decide if they are doing a good job.

If you want entertainment and excitement, follow the news headlines. If you want to build wealth, follow quarterly results.

Observations on the Market No. 418