Navigating Market Volatility Together

Contributors

Volatile Financial Markets
What To Do?

Given recent financial market volatility, we want to provide a few supportive thoughts, as we remain upbeat for the coming year, despite domestic and global uncertainties. Of course, sudden short-term downturns can be unsettling. We get it and we want you to know what we are thinking and doing.

In our January commentary, we emphasized expectations for short-term domestic volatility this year. That observation was made well before international tensions and domestic political issues heated up with the new administration. As well, given that corrections of at least five percent can occur over three times per year – and we haven’t had such an event since last August – we have been ripe for a pause or pullback which is part of what goes with investing. Of course, every downturn has its own set of contributing factors, one of which is a byproduct of investors having become too exuberant. As well, the past few weeks have been filled with heated public policy debates and swift decisions from the new administration, coupled with geopolitical tensions. In essence, conditions were ripe for what has recently passed.

So, here is where it is important to step back from the heat of the moment and consider critical data that carries more weight than today’s headlines. The US economy continues to be the envy of the world. Employment is generally strong and the Federal Reserve has not cut interest rates since December as the outlook for economic growth continues to be strong with inflation reduction still being the priority.

Now, we come to the most important factor for investors. Analysts are forecasting earnings growth in 2025 of roughly15% and another 13% in 2026. These are big numbers and warrant our attention. This data is extremely telling, because earnings ultimately drive stock prices. And such growth in earnings, should it be realized, is not what one would expect to coincide with a significant market contraction.

You may recall in our 4Q24 advisory letter we quoted NY Times columnist Morgan Housel. He said “All past declines look like an opportunity, all future declines look like a risk.” We have been through chapters such as these before and, rest assured, while we are generally upbeat, we are taking note of myriad factors that feed into investment climate and investor mindset. We have made some tactical adjustments where we have felt the need, but we are comfortable with our current approach. Of course, we encourage any of you to check in if you want to discuss your personal situation.

As always, we remain committed to navigating this market environment with discipline and strategic foresight.