Q1 Review & Updates
- david280796
- May 1, 2025
- 2 min read
Hi All,
I wanted to take some time to share some thoughts on the first quarter of 2025. If you’ve peeked at your portfolio recently or watched financial news, you know the markets have been extremely volatile. We may continue to see high levels of volatility until the tariff policies shake out. We’ve experienced a correction, bear market, and GDP decline all in the first quarter. A correction is a 10% decline in the market (S&P 500). A bear market is a 20% decline, which we briefly entered during the first quarter. Recently, we learned that the US economy shrank during the first quarter by .3%. When GDP shrinks for two consecutive quarters that is technically a recession. While all of that seems alarming, it’s important to have some perspective. Take a look at the chart below. It outlines the historical returns of the S&P 500. Historically, the S&P 500 has returned an average of 10% annually. As you can see, it actually rarely returns 10% in a given year. Instead, we have to live with the ups and downs. Participating in the market volatility is the cost of earning 10% (or more) on average over the long run. As I write this today, the S&P is down 4.23% year-to-date.
WHEN IN DOUBT, ZOOM OUT
The chart below shows the S&P 500 growth path. Sometimes looking at historical data helps put downturns into perspective. You can see the financial crisis of 2008 and the Covid downturn in 2020. While those pullbacks seemed significant at the time, they all recovered with steady growth to follow.
SHOULD I MOVE MY PORTFOLIO TO CASH?
Not for my clients. Any funds that we invest in a 401k/403b, IRA, Roth IRA, brokerage account etc have a time horizon of at least 5 years. Funds that you plan to use within 5 years should be liquid. Nobody knows how the rest of 2025 will play out. It could end in negative returns or it might be another strong year. We can’t control that. However, we can control our investment behavior. It’s important to continue to implement your investment plan. Continue participating in your employer 401k, contributing to your Roth IRAs, 529s, and brokerage accounts. Know that together we designed your portfolio according to your goals, time horizon, and risk tolerance.
TIPS
Don’t look at your retirement accounts daily (I do that enough for the both of us!). Markets are driven by emotion in the short term. Earnings drive market performance in the long run.
Continue with your investment strategy. Some of your best performing investments will be purchased during these dips. Think of it as a sale.
Keep perspective. We don’t invest funds that you plan to use within a 5 year period. Your investments are long term dollars.
Ignore the financial news. News is designed to attract eyes. If it causes anxiety surrounding your portfolio, ignore it.
Schedule a meeting. If you feel unsure or want to talk through the recent market volatility, schedule a meeting on my calendar.
I hope this helps! Go ahead and schedule our next quarterly meeting. Feel free to share this blog with a friend or colleague if you think they would find it helpful. -David