11 Mar Market Update: March 11, 2025
This past month has been a rollercoaster for stocks and if you’re starting to feel the pain, you’re not alone. Let’s make some sense of what’s going on.
Watch as a video instead: https://youtu.be/_nC3e83HZH4
We have experienced pullbacks in all major market indices, and large corrections on some of the largest US stocks. What exactly does this mean? In the last three months the S&P 500 is down about 8% and Nasdaq is down 12%. Our beloved “Magnificent 7” led a dip in stock prices on Monday. Shares of Nvidia (NVDA), Tesla (TSLA), Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta (META), Apple (AAPL), and Microsoft (MSFT) all fell, with Tesla falling a whopping 15%.
The big question on everyone’s mind is, should we sell?! CNN’s Fear and Greek index, which is a composite index designed to measure investor sentiment in the US stock market, plots us at Extreme Fear. Folks are genuinely rattled, and for good reason. We hate seeing our portfolio drop!
Source: CNN.com
This is often when people really feel the itch to “get out and stop the bleeding.”
This urge is completely understandable but the challenge is, when do you buy back into the markets? As you know, we can’t sit on the sidelines forever. Herein lies the issue. It is virtually impossible to time this decision correctly. When asked when the right time to buy back in is, investors often answer:
“When things calm down.”
“When markets seem less volatile.”
“When the economy improves.”
Unfortunately, when we feel emotionally ready, it’s often too late. Here’s why trying to time the market, rather than staying the course, will often cost you instead of saving you. The chart below shows $1,000 invested in the S&P 500 in 1990. There have been no shortage of scary moments in the markets since then: Y2K, the Dot.com burst, Mortgage Crisis, Fiscal Cliff, the Covid pandemic, and war overseas. If you had simply held during that time, your average annual return was 10.21%.
But let’s say instead you sold, and struggled to decide when to get back in. Markets recover fast and are a leading indicator, which means they often recover before “things settle down” in the economy. If you missed the 5 best days, you can cut your return to 8.72%. Missed the 25 best days? You’ve cut your return in half! And this happens all the time – 25 days is nothing in our lives. Maybe you were “waiting out the holidays,” “when we get home from vacation,” “after that important conversation with my wife.” or something like that. It’s easy to miss out and buy back after markets have recovered.
Source: S&P 500 via Morningstar.*
So what’s an investor to do on a day like today? You’ve heard me say it before: you’ve got to stay the course. If have some cash sitting on the sidelines, conventional wisdom says it may be time to invest it (please talk to your advsior). It is buy low, sell high after all. Easier said than done in a month like this, I know.
Some folks have asked me if it’s different this time. While this year feels very tumultuous already, consider 1968. It was a very difficult time here and abroad, and yet, the S&P ended up 7.7%. The truth is, we really don’t know what is going to happen this year!
If we look at more recent crises, there’s ALWAYS a reason to panic and sell. The chart below shows the major events from 2009-today, and even though I can personally recall feeling worried many times, still the S&P rose 676%. And you’ve got to be in it to win it.
Recently I’ve heard more questions about the current political climate and whether that will make a difference. To that I say, it hasn’t mattered as much as one might think who holds office or controls congress.
Why not? Because while congress enacts laws that impact the investing climate, ultimately investment returns are based on corporate profits. But Angela, you might say, we are currently putting tariffs in place that will most definitely impact those profits! I’ve even seen posts online claiming the great depression was started by tariffs. That is false! Tariffs were actually LOW at the start of the depression. Higher tariffs were implemented months later. The effects of the newest tariffs on the economy are still unclear, however experts believe that the current economy is stronger than it was during the Great Depression.
While we can reasonably conclude that these tariffs probably won’t cause another depression, they might slow down the economy, and we have a recent example of this. The 2018-2019 tariff war caused market volatility, but ultimately led to growth. US and Chinese stocks initially fell due to trade tensions but recovered strongly after the Phase I trade deal was announced in October 2019. The S&P 500 gained 31.49% in 2019, and the MSCI China A Index rose 36.40%. Once markets adjusted to the tariffs and a resolution was reached, financial markets stabilized and actually grew.
Looking ahead, this week we’ve got CPI numbers to review, which could keep things volatile. Congress is, yet again, getting their budget vote down to the wire, with the deadline on Friday. This vote is critical for avoiding a government shutdown. So, no shortage of market moving news coming your way.
Despite the catchy news headlines showing pained stock traders and charts in the red, please try to remember that market fluctuations are normal and often temporary. Historically, markets have shown resilience and the ability to recover from downturns. Diversifying your portfolio and focusing on long-term goals can help mitigate the impact of short-term volatility. Market dips can also present buying opportunities for investors looking to acquire assets at lower prices so again, get that cash to work. I’ll leave you with a reminder to turn off the news noise and do something kind for yourself. Also, no matter what has happened in the US historically, we have always risen from the ashes to be better than before. I have no reason to believe it’s different this time.
Please give us a call if you’re feeling worried or would like to discuss your plan.
*Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. In USD. For illustrative purposes. The missed best day(s) examples assume that the hypothetical portfolio fully divested its holdings at the end of the day before the missed best day(s), held cash for the missed best day(s), and reinvested the entire portfolio in the S&P 500 at the end of the missed best day(s). Annualized returns for the missed best day(s) were calculated by substituting actual returns for the missed best day(s) with zero.
S&P data © 2024 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. One-Month US T-Bills is the IA SBBI US 30 Day TBill TR USD, provided by Ibbotson Associates via Morningstar Direct. Data is calculated off rounded daily index values.
Information is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products, or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.
The commentary in this post (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of Angela Wright, an Investment Adviser Representative of Gemmer Asset Management LLC (“GAM”) and should not be regarded as the views of GAM, or a description of advisory services provided by GAM or performance returns of any GAM client. References to securities or market-related performance data are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.