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David Ricciardelli

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Address 200 King Street West 8th Floor Toronto ON, M5H 3T4
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David Ricciardelli

March 16, 2025

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An image of maps, people shaking hands and stock market information.

Trump-certainty, it’s like uncertainty but less certain

As we entered 2025, we expected stock market volatility to increase after being relatively muted over the last two years. Inconsistent communication about tariffs, government policy, negotiations around the debt ceiling, and the response to foreign governments have created uncertainty and caused volatility to surge. This uncertainty has driven one of the fastest 10% corrections in the S&P 500. Below, we use charts to put today’s market in context.

 

Should I Panic?

We never pretend to know what the market will do in the short term. While the S&P 500 has returned about 10% per year since 1928, the gains rarely come in a consistent manner. Since 1928, the average peak-to-trough drawdown for the S&P 500 during a calendar year is 16%. The median drawdown is 13%. The correction in the market between February 19th and March 13th occurred quickly (16 trading sessions and is the  7th fastest 10% correction since 1929), but the magnitude of the drawdown is not unusual.

A table showing the total return and maximum intra-year drawdown for the S&P500 since 1928.

 

 The Stock Market Typically Bottoms in March

Looking at the last twenty years, the S&P 500 typically bottoms on March 12th for a given year. The trend for the year looks significantly better once the index gets the March bottom out of the way.

A chart showing the average return of the S&P500 through the last twenty calendar years.

 

The Third Year of a Bull Market

The stock market is in the third year of a bull market from the October 2022 low. The third year of a bull market tends to be messy, and 2025 appears to follow a familiar pattern.  

A chart showing the average return of the S&P500 during each of the first three years of a bull market.

 

Markets Hate Uncertainty

Consistent with the third year of a bull market, expect market volatility to persist. Volatility will likely continue until companies and investors become more comfortable with how and what government policies will be implemented. The US administration might be playing checkers, chicken, or ten-dimensional chess, but they are not communicating effectively, and it isn’t easy to understand the end goals.

A Tweat from President Trump's X account that says "No crying in the casino".

 

Bloomberg recently reported (link; paywall) that three of the seven fastest 10% corrections in the S&P 500 since 1929 have happened during Trump presidencies.

 

Fortunately, there are also some positive trends.

 

Muted Inflation

Truflation tracks more than 13 million data points and has been an excellent predictor of the direction of inflation measured via CPI. The latest Truflation data indicates that inflation is back at 1.3%. Prices are rising at the slowest pace since December 2020, and actual inflation is likely below the 2% target used by central bankers.

A chart showing that Truflation's inflation forecast is back to 1.3%.

 

US Jobs Growth has been Positive for 50 Months

A chart showing monthly non-farm payroll (jobs) growth in the USA.

 

Investor Sentiment has Lots of Headroom for Improvement

CNN Fear and Greed Indicator

A gauge showing that CNN Fear and Greed index now reads Extreme Fear.

 

What’s an Investor Todo

Volatile and uncertain markets aren’t fun. Investors are left to wade through a sea of conflicting data points and scary headlines, but our persistent basis is to stay invested. Making a ‘hero call’ to sell investments and go to cash is challenging because it requires a second ‘hero call’ to reinvest. The best and worst days in the market tend to cluster close together (the chart below lays out the best and worst days from 2009-19).

A table showing the 10 best and 10 worst days for the S&P500 from 2009-2019.

 

Market timers risk anchoring to their selling prices and missing years of gains. The chart below shows the devastating impact on returns of missing the best days in the market since 1930.

A table showing the change in the return of the S&P500 each decade if the 10 best and worst days were missed.

 

As a result, we recommend that investors save and invest consistently across market cycles. This process will allow an investor to buy more securities when the market is inexpensive and fewer securities when the market is expensive.

 

To smooth out the market cycle and reduce volatility, we recommend a barbell strategy where high-quality companies exposed to secular themes provide exposure to equity markets. The other side of the barbell is cash, actively managed fixed income and alternative investments that reduce volatility and provide ballast for portfolios. For investors in the distribution phase of their lives, the focus expands to optimize the tax efficiency of distributions.

 

Please get in touch with me for a more detailed discussion.

 

Delli (delli@cibc.com)

 

 Disclaimers:

This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers, and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and a spread between the bid and ask prices if you purchase, sell, or hold the securities referred to above. © CIBC World Markets Inc. 2025.

 

Commissions, trailing commissions, management fees, and expenses may all be associated with hedge fund investments. Hedge funds may be sold by Prospectus to the general public, but more often are sold by Offering Memorandum to those investors who meet certain eligibility or minimum purchase requirements. An Offering Memorandum is not required in some jurisdictions. The Prospectus or Offering Memorandum contains important information about hedge funds - you should obtain a copy and read it before making an investment decision. Hedge funds are not guaranteed. Their value changes frequently, and past performance may not be repeated. Hedge funds are for sophisticated investors only.

 

If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.

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