|
Well, I’m not going to say I told you so, because I didn’t. I’m not going to say I predicted this, because I never predict. But you’ll recall the stock market hit a rough patch in the spring. And it recovered – at least for now. March 2025 is when President Trump’s tariffs were being announced and implemented in some cases. It was an odd thing: usually the stock market responds poorly to surprises. In this case the market responded poorly to something that was anything but a surprise. Trump campaigned on tariffs all last year, then continued to talk about them after winning the election in November. But then when he followed through with what everyone knew was coming, the market dropped.
We were down in March and April. As much as 15 % at one point. People were worried. I got a few calls from clients asking what was going to happen. And in keeping with my boring style, I told them I had no idea, thoroughly disappointing many of them. But they know me well enough not to be surprised by now.
Enough people were upset, and the numbers were dramatic enough, that I wrote columns two months in a row this spring about stock market drama and how to handle it. I am really good at being a broken record (is that a dated reference?).
Here are some of the things I told clients and wrote in those columns:
“A stock market drop is like catching a cold: it happens now and then. We don’t always know why. It’s painful. And the less you do, the sooner you will recover. Many get frustrated with this advice about their investments. But all the research tells us that waiting works, and has always rewarded those who are patient. Of course, past performance does not guarantee future results.”
I reminded readers that this is a regular occurrence. American Funds research says stock market drops of 5% have occurred twice a year on average for the last 70 years. But they last less than two months.
Well, that’s about what happened this year. We started 2025 near an all-time high. We hit a new high in late February. Then the market started dropping. In April we were down 5%. In May we were down another 1%. The bottom was April 8th – at that point we were down 15% from the beginning of the year. And people were worried. The Internet and 24-hour news channels were having a great time announcing scary news all day long. It gets ratings, so they love it.
But then we started to recover in May, and we hit all-time highs again at the end of June. So sure enough, the good old boring approach worked. Consistent with the American Funds research, the drop last lasted about two months.
Who knows what will happen the rest of the year or next year. Of course I will never predict. The important lesson is the one we see repeated so often: despite its reputation for being chaotic, volatile, unpredictable, the stock market has been one of the most consistent forces there is over the past 100 years.
I am happy to say that despite several worried clients, I don’t have a single one who sold while the market was down. They hung in there. As many of them say “this is not our first rodeo.” I know it’s not yours either, so hopefully you hung in there too. More drops are sure to come at some point, and these are important lessons to be reinforced.
Travis Ford, CFP®, is a partner and financial planner at Wallstreet Group Advisors in Jefferson City. 573-297-2049 or travis@wallstreetgroupadvisors.com. Securities and advisory services offered through CreativeOne Securities, LLC member FINRA / SIPC and an investment advisor. Wallstreet Group Advisors and CreativeOne Securities, LLC are not affiliated.
| 
