While there’s certainly no way to know what our future market and economic conditions may look like, I am fairly certain of one thing: increased volatility is the new normal. While the markets have always been volatile, we have seen periods of increased volatility over the past three years that are very unusual, and I expect this to continue into the foreseeable future.

I believe this because of all the uncertainty in today’s world. The following are just a few of the many uncertainties we face in the coming years:

1. Debt crisis is Europe

2. High levels of national debt in the US

3. The future of Social Security and Medicare

4. Fears of instability in Asia

5. The war on terror

One thing uncertainty leads to is higher levels of volatility. Because there are so many unknowns of how these challenges will evolve, small changes in the economic environment create a large ripple of market volatility. The stock market is already hypersensitive; even when minor changes in economic data are announced, we are seeing higher and higher levels of volatility.

I expect this increased level of volatility will continue for some time. While I believe we will see some periods of relative calm over the next several years, I expect these periods to be replaced once again by higher levels of volatility.

We will continue to manage portfolios with these expectations. In our latest re-balance of investments, we added even more diversity to the mix. The idea is to have as many asset classes as possible that do not move together. As one investment class zigs, another zags. The goal is to have a high expectation of reasonable growth over the next five years, regardless of market conditions.

When combined with a well structured retirement income plan that eliminates the need to draw income from market investments when they are down, we believe we can significantly reduce the negative impact of this increased volatility on your retirement lifestyle.