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I've included a short excerpt below of an email I sent out in early March:
“Returns were extremely positive in Trump’s first term but they came with volatility. That is not to suggest that the scenarios are identical or will necessarily repeat themselves. Some feel Trump is ignoring the market as a one term president-he said as much himself-and therefore he is willing to let the market decline to achieve his goals of restoring the US manufacturing base and level the trading field with our trading partners. I think this is true up to a point but I’m not sure where that point is. The market is currently oversold, but the bias is to the downside due to the daily uncertainty of this administration’s tariff talk. I will add, in my opinion, the market is front loading all the bad news to the exclusion of the positives of Lower taxes, less regulation, smaller government and hopefully less debt .Having said that tariffs make our jobs extremely difficult! If we could just go to cash for the next 6 weeks I think we might. But look at the dramatic impact of missing the best 10 days which invariably occur during periods of uncertainty. Since 2015, if you missed the 10 best days each year your return went from positive 12% to negative 10%! We aren’t complacent to declines, however, and have raised cash significantly. Unfortunately, the market will continue to be very difficult in the near term.” March 7,2025
We don’t have a crystal ball, but our concerns then were borne out. Cash indeed would have been the better place to be-- particularly if we didn’t have to pay capital gains tax to go to cash.
The last bear market (losses of 20% or more) for U.S. stock bottomed in October 2022. In the two and half years since then, volatility had declined by 60%. Low volatility, appreciating stock prices, and growing portfolio values seemingly became the norm. But we know that such environments, while eagerly welcomed, never last forever.
On February 19th, Emory sent an email noting the health of the market due to broadening out of industry sectors leading to a new all-time high of the S&P 500 index.
From the 19th until this past Wednesday, "Liberation Day," the market had declined by 10%. Over the last two days the market has lost 9.5% (with a near 5% decline yesterday and 4.5% loss as of 2:00pm today). This kind of volatility and the sharpness of such a decline is not normal.
The market is a forward-looking vehicle and currently it is pricing in recession and the possibility of a global slowdown. There is no doubt that the current Trade Wars and Tariffs are having tremendous impact on the market this week.
The S&P 500 is now -16% from that high on Feb. 19th and is now -12% for the calendar year. This is the worst week since March 2020 which of course was fueled by the pandemic fears. Bearishness is at the third highest level ever which is a potential sign that we are nearing a bottom. So, clearly the markets are pricing in all the bad news that may or may not happen.
Having said that we feel strongly the White House must come out with some constructive news on tariff negotiations this weekend or we will, in all likelihood, see further selling next week. For the last +45 days we have been strategically increasing cash positions by selling stocks – some of which were among the best performing stocks in the entire market over the last several years.
It is hard to sell stocks, but it is necessary when uncertainty is this high and the fear of recession gains traction and “clicks” every day that goes by without some kind of resolution or agreed upon negotiations from our trade partners around the globe.
We do not know when the geopolitics or the market will settle down or find their footing.
We do know that we are committed to managing your portfolios with a keen eye and interest in preserving your wealth and creating future wealth when the opportunity presents itself again. We’re not there yet, but we’ve experienced other periods of similar volatility, and we know that brighter days are ahead. Admittedly though, those days may be further away than we’d prefer.
We know you’re nervous and uncomfortable. We empathize with you! We’re also fully engaged in your portfolios. This will pass, but it may remain messy for the near future.
Please respond to this email or call us to talk if you’re feeling overwhelmed or panicked. We’re here for you.
We will be fine,
AP
Anthony and Emory
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