In March, market results were negative. Bonds were very slightly up, international stocks were down a bit, while US large-cap and small-cap stocks went down more. So far for the year, results have been more mixed. International stocks and bonds have increased, but US stocks have declined.
Tariff News Dominates
So far this year, headlines and news items have seemed to be more frequent, chaotic, and controversial. Most of this has originated from President Trump, who has used the threat of tariffs (taxes on products imported from foreign countries) as a policy tool in order to potentially raise revenue for the government, renegotiate our trade agreements, and revive our domestic manufacturing. At times, the stock market has reacted negatively. The S&P 500 lost over 10% of its value from February 19th through March 13th before stabilizing as of month end. It remains negative for the year.
Here are three thoughts regarding the current market environment:
- In terms of stock market reaction, current news always has a shelf life. Whenever something new happens, markets tend to react quickly. But over time, they develop an immunity, which reduces the impact. Over the past few years, news items have come and gone:
o 2020 – COVID 19 pandemic
o 2021 – Supply Chain Crisis
o 2022 – Persistent Inflation and Rising Interest Rates, War in Ukraine
o 2023 – Silicon Valley Banking Crisis
o 2024 – Tariffs and Increased Geopolitical Tensions
In the present, the news seems like a big deal, but investors forget past news as something new replaces it. While we expect tariff headlines remain for a while, their impact on markets will fade. - The recent market volatility is still within historical norms. The following chart from JP Morgan shows volatility for each year going back to 1980:
The red dots show the severity of each intra-year decline. 10% corrections like this are quite common historically. In many years, markets decline but still finish in positive territory (shown by the gray bars).
- Portfolio diversification has helped mitigate the pain. While US stocks are down this year, international stocks and bonds have performed well, offsetting these losses. During 2023 and 2024, US stocks had strong years, and when they struggled this year, other investments picked up the slack. This is how a diversified portfolio is designed to work.
We understand current news can be unsettling, and we appreciate the trust you have placed in us. If you would like to discuss current news items in more detail, let’s talk.
