Dear Investors,
Over the past few weeks, you’ve likely noticed increased turbulence in the stock market. In our opinion, this volatility stems from several key factors.
- First, uncertainty around U.S. fiscal policy—particularly tariff threats and rising government debt—has unsettled markets.
- Second, the Federal Reserve’s cautious stance on rate cuts, with inflation still above the 2% target, has tempered expectations for aggressive monetary easing.
- Finally, mixed economic signals, like softening GDP growth forecasts and uneven tech sector earnings, have fueled short-term jitters.
- These dynamics, amplified by global trade tensions and geopolitical noise, have led to sharp swings in indices like the S&P 500.
Despite this choppiness, there are compelling reasons to remain optimistic and stay invested per the financial plans we’ve crafted together.
- The U.S. economy remains fundamentally strong, with consumer spending resilient and unemployment low at 4%. (Source: Federal Reserve Economic Data, "FRED")
- Corporate earnings are projected to grow by double digits in 2025, particularly in technology and manufacturing, driven by AI adoption and potential deregulation. (Source: FactSet)
- Fed policy, while restrictive, has plenty of room to accommodate from here, with interest rates for the short end sitting at about 4.33%. (Source: Federal Reserve Economic Data, "FRED")
- Historical patterns also favor patience: the third year of a bull market, while often muted, rarely turns negative, and pullbacks from recent highs are normal even in positive years. (Source Morningstar Direct)
- Moreover, $7 trillion in money market funds sits ready to flow into equities as rates decline, potentially lifting stock prices. (Source Morningstar Direct)
Volatility is a feature, not a flaw, of investing. The goal of our diversified portfolios is to weather these storms, balancing growth opportunities with risk management. In fact, treasury bond yields have been dropping (which increases their market prices) and as a result they have been 'hedging' stocks as of late, serving as a ballast for portfolios. We find that panic-selling risks locking in losses and missing the rebound. By sticking to your long-term plan, you’re positioned to potentially capture gains as markets stabilize. Let’s discuss any concerns—we are here to guide you through this.
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Index benchmarks presented within this report may not reflect factors relevant for your portfolio or your unique risks, goals or investment objectives. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index. The S&P 500® Index, or the Standard & Poor's 500® Index, is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies.
FRED (Federal Reserve Economic Data) is an online database consisting of hundreds of thousands of economic data time series from scores of national, international, public, and private sources.
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.