Recent market conditions have shown early-year volatility that, in the past, we might have seen over a longer cycle. Alongside broader economic uncertainties, recent political developments and statements from President Trump have added an extra layer of unpredictability to the markets.  He has also made it clear he is going to negotiate tough and cause some chaos for sure in the short term.  The market hates uncertainty, so we are not surprised at the downside momentum currently happening.

But remember:  Over my 21 years of doing this, I’ve seen probably 20 corrections over 10%, at least 5 bear markets down over 20%, and one period the market was down almost 50% from peak to trough.  Every time, the market has come back, the only question is does it take 6 weeks to bounce back from a 30% drop (like Covid, remember March 2020??), or take 3-4 years like after 2008, “The Great Recession”.  Please remember this, all of our plans are stress tested to withstand these temporary market pullbacks.  

Our Investment Committee continues to focus on the fundamentals that drive stock market performance—company health, earnings, and macroeconomic trends—while also assessing where policy shifts might have the most significant impact. Here are some key observations:

• Recent volatility has come from heightened global and domestic economic and political uncertainties. How far is Trump going to go with tariffs and is he going to end up backing down? This remains unknown and we feel the risk of getting caught in the crosswinds of him changing his mind is greater than trying to make any major shifts.
• A year ago, rates were forecasted to drop significantly over 2025. It’s ever-changing, but forecasts for rate cuts in 2025 are minimal, maybe a cut or two. The Federal Reserve has stated that they want more clarity on tariffs before proceeding with and further rate cuts.
• A majority of Q4 earnings for companies have been released, with a large majority (of three quarters) beating earnings per share (EPS) estimates. EPS is a key driver of stock market performance, alongside expected future earnings.
• Politically driven volatility remains a factor. History has shown that political statements can amplify market uncertainty, and we expect that this dynamic may persist into the near- to mid-term, even as market fundamentals continue to support long-term growth.

Our thoughts on what to do in the midst of elevated market volatility?

• DO NOT SELL STOCKS WHILE THEY ARE DOWN – because we have found market timing is a losing trap, and more money is lost trying to time the market than staying in during the ups and downs.
• Market volatility is normal. Market corrections (a fall from top to bottom of more than 10%) are normal and happen every year on average.
• Make sure your bucket 1 (cash in the bank) is filled and you have enough cash for the next 6-12 months’ worth of expenses. This provides flexibility during periods of heightened volatility.
• Look at what’s working: our data shows the fixed income index is up almost 3% for the year, international stocks are up almost 7%, and value stocks are up almost 2%. Diversification is working. This demonstrates that a diversified portfolio can help buffer against isolated volatility. *
• If you have cash to invest, take advantage of the volatility and be prepared to buy as the market presents opportunities.

Bottom line, control what you can control. Call us if you need to talk as it relates to your personal financial plan and how your portfolio is situated to handle these volatile spikes. We welcome your thoughts and appreciate your trust in us as we monitor closely what’s happening.

 

*JP Morgan

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of David Adams and not necessarily those of Raymond James.

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation

Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation

Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary.