Last week, the market saw its most volatile period since 2022, with headlines reporting the “worst day in two years for the S&P 500” and “Japan’s stock market experiences worst decline since 1987.”

Market volatility can be unsettling, but it is also a normal and expected part of investing. Your investment plan accounts for these fluctuations and includes safeguards to protect your financial security.

During these periods, we focus on:

• Tax-loss harvesting: We're identifying opportunities to crystallize losses, which can offset gains of the past three years or be carried forward indefinitely.
• Rebalancing: The definition of buy-low sell-high. Bonds have held up well relative to stocks. We are reviewing portfolios for opportunities.
• Staying the course: You own stocks because volatility does not threaten your financial plan – it is part of it.

Some key points to consider:

Recent volatility is a return to normal: Before last week, markets had been unusually smooth. The recent moves bring us back to a more typical pattern.

Market declines are common: The S&P 500 has experienced a 5%+ decline in 89 of the last 95 years.

Downturns don’t predict down years: Historically, the S&P 500 has risen in 70 of the last 96 years, with half of the positive years following double-digit corrections.

 

Recovery after declines: The market typically rebounds well after downturns.

This time is different: The world is facing a myriad of challenges—geopolitical conflict, political divisiveness, and economic uncertainty are at the forefront. In many ways, we are navigating uncharted territory. However, history shows that this has always been the case. Humanity's story is one of overcoming significant tests. We are an incredibly adaptable species, and while setbacks are inevitable, there are many reasons to be optimistic about the future.

Your financial well-being is our priority. If you have any questions or concerns, reach out.

Justin Caldwell
Senior Investment Advisor, Portfolio Manager
Caldwell Group