Key Takeaways
- Announced tariffs are larger than expected which resulted in stock market volatility
- Volatility is the short-term price fluctuations in price for an investment
- Despite short-term volatility, the stock market has tended to rise over the long-term
The importance of having a disciplined investment framework focused on strategic asset allocation and time in the market (not timing the market)
After setting stock market highs on February 19, 2025, the S&P 500 Index (index of mostly large-cap U.S. stocks) has fallen nearly 12% since then. As we mentioned in our prior communication, a stock market decline of -10% or more is considered a “correction”. The S&P 500 has experienced 38 market “corrections” since the 1950s, or a correction every 1.8 years.
Looking at longer-term periods, the S&P 500 is +5% over the past 1-year and +24% over the past 3-years. While short-term volatility can be difficult and painful, it is the long-term periods we are focused on as our clients generally have long-term goals.
Recent stock market volatility has been largely influenced by the announced tariffs and the potential negative impact those tariffs could have on economic growth and inflation. However, the tariff picture continues to be very fluid as tariffs can be increased or decreased at a moment’s notice. As I write this, there are ongoing talks between Vietnam and the U.S. regarding changes to the tariffs recently put in place. Vietnam was hit with one of the largest reciprocal tariffs of 46%. This reinforces the point we made in our last communication that there continues to be uncertainty around the timing (when), duration (how long or short), and magnitude (marginal or material impact) of tariffs.
Another key point to highlight regarding the recent stock market drawdown is the catalyst for the drawdown. While a few recent stock market drawdowns were caused by uncontrollable events, the catalyst for the current stock market drawdown is controllable. For instance, (1) March 2020 drawdown, caused by a pandemic (largely an uncontrollable event), (2) 2008/09, caused by a banking crisis (mostly uncontrollable event). However, the current stock market drawdown is from a controllable event, signing new tariffs in place on foreign countries by the current administration.
At Landing Point Financial Group, we lean into our disciplined investment philosophy during periods of short-term volatility, as selling during a drawdown can lock in potential losses as well as missing out on the market’s subsequent recovery. We will continue to monitor financial markets and make appropriate changes as needed, to make sure client portfolios are positioned for long-term success. At Landing Point Financial Group, we will continue to invest with a long-term and disciplined approach catered to our clients and their individual goals.
Please reach out to your advisor if you have any questions.
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