MP017: Moderate Corrections are Part of the Investing Journey with Jason Ranallo

Stock market volatility has returned, driven in part by increased uncertainty. As of March 11th, the S&P 500 was down about 9.3% from its all-time high made in February. The largest tech-oriented companies, like those comprising the Magnificent 7, experienced an even steeper decline. While this can feel unnerving, it’s important to remember that five to 10 percent market declines are not unusual.

 

Over the past 100 years or so:

- A 5% market decline has occurred about 3.4 times per year (mild correction).

- A 10% market decline has occurred about 1.1 times per year (moderate correction).

- 100% of the time (present decline excluded, for now) declines have been overcome (new all-time high).

 

During this period of increased market volatility, diversification of investments has proved its value. While U.S. large-cap stocks, broadly, are down so far this year, international stocks, bonds, and commodities have been positive.

 

Why diversify: “No single investment or asset class should determine the success of your financial future.”

 

Economy: Estimates of activity as measured by real GDP, were recently revised down. Importantly, this revision was primarily driven by a surge in imports ahead of potential tariff implementation. In short, economic activity is uneven given that people and businesses were front running the tariffs. Despite the concerns and revisions, other key economic indicators remain stable. Unemployment is low, household debt, while increasing, is still manageable, and credit conditions are supporting demand. This data can change, however at this time, there is not yet evidence of a broader economic slowdown or recession.

 

We know that market volatility can feel unsettling. Uncertainty, however, has always been part of investing, and these mild and moderate corrections, while uniquely challenging, have historically been overcome.

 

Our Approach: Maintain a disciplined strategy built on asset and time diversification, an ability to take action, and thoughtful planning.

 

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Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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