In March 2020, Kevin and I, like many of you, witnessed the market’s relentless decline. Over just five weeks, the S&P 500 dropped by more than 32%. I won’t deny that Kevin and I were concerned during this turbulent time. However, we chose not to sell the investments in your accounts for one clear reason: the 32% decline was entirely unwarranted based on the economic data available at that time. That was then. Today, with the S&P 500 down 10%, the economic data is different. Unlike 2020, the current market volatility may be justified.
While tariffs may have triggered the recent market drop, larger issues are at play. Stock market corrections of 10-15% occur, on average, every 19 months. The last widely recognized correction was in July 2023, when the S&P 500 fell by 10% (a minor correction by our standards). That was 20 months ago, suggesting we are statistically due for a correction. The Buffett Indicator, which compares U.S. market capitalization to GDP, reached an extraordinary 211% in late 2024, far above historical norms. This indicates that market growth has outpaced economic fundamentals, making a correction, though painful, justified.
For months now, we’ve been invested in a larger portion of risk-mitigating investments specifically to help ease the pain that the market is experiencing. We are continuing to monitor the market but remain confident in the long-term outlook. We view this correction as a buying opportunity. While this market correction might be temporarily unsettling, it is a natural part of the economic cycle, especially when valuations become disconnected from underlying fundamentals. If you would like to discuss current market conditions or your accounts, please give us a call.
“We appreciate the trust you continue to place in us.”
All performance referenced is historical and is no guarantee of future results.Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.