Executive Summary:

• Financial markets have experienced increased volatility so far this year and sentiment has declined, raising questions about the health of the bull market that has been in place since the end of 2022.

• Headlines have been dominated by political and geopolitical issues, creating uncertainty for investors, consumers, and business owners alike.

• While volatility can be unnerving, history suggests that market corrections occur far more often than most realize. We encourage clients to exercise patience, revisit your long-term plan, and remain open to opportunities that may arise.

If you follow financial media, it is no surprise that equity markets are having a moment.  Tariffs, trade wars, lost government jobs, DeepSeek AI innovation and more have dominated headlines for the better part of this year and markets volatility has followed thereafter. 

US technology, US large cap, and small cap stocks, in particular, have declined in the past few weeks.  In fact, the Nasdaq Composite, the S&P 500, and the Russell 2000 indexes, which serve as proxies for those respective sectors, have all experienced corrections this year (defined as declines of more than ten percent from previous highs) and are down year to date (see below).[1]&[2]

However, we always advocate for portfolio diversification and the recent volatility underscores its importance.  While US technology companies that benefitted from the advancement in artificial intelligence the past few years have fallen recently, some of the unloved part of the market such as dividend-paying stocks and foreign stocks, along with diversifiers like commodities and bonds, have fared much better this year (see below).[3]   

To be clear, we believe that all of the issues mentioned at the beginning of this article are significant and have the potential to continue impacting markets.  We continue to monitor these developments and we will adjust portfolios if and when we believe it is warranted.  We also recognize that market drawdowns, regardless of size, can be unsettling for clients, particularly after a prolonged period of relative stability. 

Keep in mind, however, that 2025 follows two exceptionally strong years for US stocks with relatively low volatility.  For example, the S&P 500 index, which is a proxy for large-cap US stocks, returned more than 20 percent in both 2023 and 2024 with below-average intra-year drawdowns (see chart below).[4]  While this year’s pullback is not ideal, it is not unusual compared to the historical average, as markets have experienced an annual intra-year pullback of roughly 14 percent each calendar year since 1980.

It is also important to remember that today’s volatility may be remembered as nothing more than a minor bump in the road years from now.  For example, zooming out to examine the S&P 500’s returns over the past decade reveals an annualized return of more than 12 percent per year despite three declines of 20 percent or more.

What Should Investors Do During Volatile Markets?

It is unclear how the current market volatility will play out in the short-term.  However, we have navigated volatile markets many times before and have learned the following key lessons:

1.     Don’t Panic.  Decisions made in duress rarely yield the best results. 

2.     Reconfirm Long-Term Plan.  Investing is a marathon, not a sprint.  We are believers that time in the market is more important than timing the market.

3.     Watch for Opportunities.  We are continually seeking opportunities on your behalf, and periods of volatility often create mispriced assets and compelling long-term investments opportunities.

As always, we appreciate the opportunity to assist you in reaching your financial goals.  Please do not hesitate to contact your advisor if you would like to schedule a time to discuss these market developments in the context of your specific situation. 

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Sources

[1] Source: YCharts

[2] Source: https://www.bloomberg.com/news/articles/2025-03-11/s-p-500-set-to-enter-correction-as-growth-fears-trigger-selloff?itm_source=record&itm_campaign=US_Stocks&itm_content=S&P_500_Correction-2 

[3] Source: YCharts

[4] Source: Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. 3/11/2025

Important Disclosures

The views expressed in this piece are the author’s and may not represent the opinion of Investment Research Partners. The views are as of the date listed on the material and are subject to change based on changes in fundamental economic or market-related data. Forecasts regarding the market, economy, and individual securities are subject to a wide range of possible outcomes. Past performance may not be representative of future results, and all investments are subject to loss. This piece is not intended as individualized investment advice. Before participating in any investment program or making any investment, readers are encouraged to consult with their own professional advisers, including investment advisers and tax professionals.