April 22, 2025

 

"With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim

 

There’s no denying that this has been a turbulent few weeks in the markets, and I know many of you are feeling the effects of that in your portfolios, your headlines, and your nerves. With the S&P 500 correcting quickly and global news cycles feeding uncertainty, it’s natural to feel uneasy. But I want to offer some context to help you step back and see this moment for what it truly is—a test of patience, not a reason to panic. I wanted to include below a few helpful charts and graphs along with some points to consider. Sometimes visuals are helpful for perspective.

 

Volatility Is a Normal Part of the Journey

Let’s start with the facts. The recent 10% drop in the S&P 500 happened fast—just 16 trading days—which makes it one of the quickest corrections in nearly a century. But in terms of size, it’s not out of the ordinary. Since 1928, the average annual peak-to-trough decline for the S&P has been around 16%. The markets have always had temporary pullbacks, but the long-term trend has remained upward.

 

This latest bout of volatility was sparked primarily by unexpected tariff announcements and trade-related tensions. The U.S. administration’s sudden pivot on trade policy caught markets off guard. The scale and tone of the measures—combined with retaliation from major partners like China and Canada—rattled investors and raised fears about global growth, consumer confidence, and corporate spending.

 

Markets, as I’ve mentioned in the past two notes, are forward-looking. Right now, they’re attempting to price in an evolving situation. But what matters most to us as long-term investors, is that history shows us this kind of uncertainty doesn’t last forever—and that staying invested during these times has consistently paid off.

5 Reasons to Be Optimistic

 

1. Political Pressure Is Building for Resolution: The reality is that many elected officials, even within the President’s own party, are expressing concerns about the impact of ongoing trade battles. As midterm elections approach, there’s growing motivation in Washington to bring stability back to the economy.
2. Trump’s Playbook Is Predictable: If history is any guide, this administration tends to lead with threats and confrontation, followed by negotiation. It’s unsettling in the short term, but often leads to deals. We’re already seeing hints that a negotiated off-ramp could emerge in the coming weeks.
3. Fiscal Stimulus Remains on the Table: In the face of growing uncertainty, fiscal and monetary tools are likely to be used to support the economy. With inflation slowing and political pressure rising, we expect more supportive policy actions ahead.
4. Inflation Is Cooling: According to Truflation, a real-time inflation tracker, price increases are now running at just 1.3%—the slowest pace since 2020. That’s well below the Federal Reserve’s 2% target, giving policymakers room to remain accommodative and support markets.
5. The Economy Remains Resilient: Despite headlines, U.S. job growth has been strong for over four years straight. Corporate earnings are still healthy in many sectors, and consumer spending, while cautious, hasn’t collapsed. Recession fears are understandable, but at this stage, they are not supported by the data.

The Importance of Staying the Course

In times like these, it’s tempting to consider pulling back—to go to cash “until things settle down.” But history shows this approach is often counterproductive. The market’s best and worst days tend to cluster together. Missing just a handful of the best days can significantly impact long-term returns.

 

 

Consider this: after major market volatility—like we are experiencing—stocks have historically rebounded meaningfully over the next 1, 3, and 5 years. Selling during these drawdowns not only locks in losses but often means missing the rebound. The chart below shows what happens after the volatility index closes over 50. This is a very interesting chart as you can see 100% of the time the market was higher after 1,2,3,4,5 years. This is not because volatility is good, but it’s because spikes in volatility occur when pessimism has already been priced into the market.

 

This is very important when thinking about altering your investment plan and something I find myself often explaining to clients. Will it get worse? It always could, but often the market tries to price in the worst case first and then anything “less bad” as we say, can be viewed as a reason for improvement in the markets.

 

Our advice remains consistent: stay invested, stay diversified, and stay patient. Trying to time the market, especially now, risks turning temporary volatility into permanent loss.

 

A Time of Change Brings New Opportunities

Beyond the day-to-day headlines, something deeper is happening. The global trade landscape is shifting. If tariffs and trade disputes lead companies to bring production closer to home, we could see the rise of stronger regional economic blocs—like North America, Europe, and Asia—with new opportunities for innovation, investment, and growth. We are looking for them each and every day.

 

This kind of structural change won’t happen overnight, but it may create fertile ground for companies that adapt early. Many times in history, the largest and strongest balance sheet companies can adapt and this is a focus of what we own and will own. As investors, this is where our attention should be—not on the noise, but on the long-term trends taking shape beneath it.

 

So, What Should You Do Right Now?

For most investors, the best action right now is inaction. Let your portfolio do what it’s designed to do—ride out short-term bumps and stay aligned with your goals. That said, here are a few principles we continue to focus on:

 

• Invest consistently. Whether markets are up or down, staying disciplined with contributions helps smooth out returns over time and allows you to buy more shares when prices are lower. I constantly make this point but it is so important and beneficial to long term investors.

• Diversify smartly. We continue to recommend having high-quality equities on one side, and a mix of cash, bonds, and alternative investments on the other. This mix helps manage volatility while staying exposed to growth. Many of you will find your performance is nowhere near the movements in the index depending on that mix and your individual situation.
• Think tax-efficiently. For those in the distribution phase of life, we’re focused on managing withdrawals and income in a way that maximizes after-tax outcomes. This includes keeping cash aside for draws and not needing to sell equity into a down market.

Final Thought: This, Too, Shall Pass

I know the news feels overwhelming right now. Markets are reacting to confusing policies and unpredictable headlines. But we’ve been here before—during COVID, during the financial crisis, and during countless corrections along the way.

 

Each time, markets recovered. Each time, investors who stayed calm were rewarded for their patience. And each time, the world found its way through.

 

This time is no different. As much as it might feel like it is, it isn’t. Every correction is different in a different way and every period we can look back and say that ultimately, the reaction was the same. Not in the effects on the world per se, but in the value of the businesses that operate in the world. There is a distinct difference there when we think about the often cited “this too shall pass” quote.