By: James Williamson
The start of 2025 has been interesting and volatile to say the least. Our team continues to have many dynamic and engaging client conversations. In our recent client conversations, we have noticed three main questions continuously surface:
- What are our thoughts on Washington, DC current politics and the uncertainty surrounding certain policies?
- What do we think about the announced trade tariffs and their potential impact on the US or global economy?
- How might the Federal Reserve respond, and could they potentially alter course in 2025?
While it’s inherently difficult to forecast and prognosticate any future market direction, one piece of timeless investment advice stands above the rest during these uncertain times.
And that advice is this: stay invested and stay diversified, especially during periods of market volatility or turbulence.
That feeling of general unease or possible emotional discomfort you may experience during these heightened periods of market volatility is understandable! It’s important to acknowledge those emotions and define or label them. However, it’s more important to not make any strategic or longer-term financial or investment decisions on those emotions!
While it may not seem like a plausible scenario in the current market environment, history has shown us that both the stock market and bond market, have a remarkable ability to persevere and recover from heightened periods of volatility, stress, and sell-offs.
One way to conceptually think of market volatility is that it’s usually shorter-term in nature, often times shorter than 6 months to 1 year (which can sometimes seem like an eternity). So, these short-term market gyrations and periods of elevated volatility often create compelling and attractive investment opportunities for those investors that possess a multi-year or even multi-decade investment time horizon.
So while Washington, DC politics, trade tariffs, and the Federal Reserve’s future policy might all seem like plausible and competing catalysts to the current and ongoing market volatility, our team would suggest that it makes more strategic sense to remain invested and stay well diversified during these uncertain and challenging market conditions.
Lastly, amongst all the competing market headlines out there, try not to lose focus on corporate earnings results and related guidance from company management teams. S&P 500 earnings projections for the year ahead 2025 and for 2026 remain healthy and above trend, however, they are subject to revision, both upward and downward! We’ll be monitoring and discussing all of these market themes closely in our investment committee meetings.