Worried About the Market
This time is not different. I try to train my clients to think of these uncertain and volatile times as buying opportunities. If you think the market is going to be higher a year from now, five years from now, and 10 years from now, you should consider adding to your investment accounts. The data has not changed.
February inflation numbers actually came in less than expected. Efforts to lower inflation are starting to work. “Earnings for companies within the S&P 500 are expected to have grown For Q2 2025 through Q4 2025, analysts are calling for earnings growth rates of 9.7%, 12.1%, and 11.6%, respectively. For CY 2025, analysts are predicting (year-over-year) earnings growth of 11.6%. The forward 12-month P/E ratio is 20.7, which is above the 5-year average (19.8) and above the 10-year average (18.3). However, This P/E ratio is below the forward P/E ratio of 21.5 recorded at the end of the fourth quarter (December 31).” Butters, John. “Earnings Insight.” FactSet. March 7, 2025. The sky is not falling. The train has not been derailed. It is positive that price/earnings ratios are coming down.
Investors are also concerned about the impact of tariffs. Yet, it is unclear whether tariffs will be imposed and it is unknown how long tariffs on Canada, Mexico, and China will be imposed. Don’t try to time the stock market. When investors try timing the market by getting in and out of the market, they inevitably miss the best performing days. Missing some of those best performing days can dramatically impact your overall return in the short and long term. Keep in mind that “6 of the best 10 days happened within 10 trading days following one of the worst 10 days.” Market Intel Exchange. Lincoln National Corporation. February 28, 2025. You don’t want to miss those days by hopping in and out of the market based on fear.
Another strategy to consider is hiring a professional money manager that employs tactical investment strategies that seek to limit loss, rotate among ETFs, mutual funds, futures contracts, use hedging strategies, and can go 100% to cash at times.
For accredited investors, consider investing in alternative investments such as private equity, private credit, and venture capital. That is a great way to add additional return potential, add diversification to your portfolio by adding investments in private companies, and lower your portfolio’s overall volatility.
The NFIB Small Business Optimism Index decreased by 2.1%. The index peaked in December at 105.1. “The Uncertainty Index rose four points to 104 – the second highest recorded reading. “Uncertainty is high and rising on Main Street, and for many reasons,” said NFIB Chief Economist Bill Dunkelberg. “Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall.” Index Falls 2.1 Points; Remains Above 51-year Average for Fourth Consecutive Month. March 11, 2025. So, overall, small business owners are still more confident than they were in the fall of last year.
Investors have also been concerned about unemployment. Unemployment increased to 4.1% from 4.0% in February, but remains low. President Trump has “signed an executive order…calling for federal agencies to promptly undertake preparations to initiate large scale reductions in force.” Mansfield, Erin. “Deadline strikes for next wave of federal layoffs. What to expect from Trump’s plan.” USA Today. March 11, 2025. We may see states having to create departments and hire staff to manage areas that will no longer be funded by the federal government.
President Trump is working towards reducing government expenditures that in the long term help will reduce the deficit. Yes, his efforts have been brisk. However, regardless of which political spectrum, you lean, most people would agree that President Trump is a very competitive person. He wants his efforts and strategies to be successful in the short term and long term. His efforts to increase the efficiency of the US government, reduce overhead, and make the US more competitive should improve the overall health of the nation and economy. His strategies may be stark, but can be effective in the long term. In the short term, many of the impacts may be painful.
The size of the federal government has ballooned since President Bill Clinton and President George W. Bush’s budget surpluses. Reducing the size of the federal government will be a huge but necessary task. “Reducing that artificial stimulus is like having morphine wear off. We expect the economy to grow more slowly this year, which means corporate profits are unlikely to grow faster than the consensus expects. In other words, what is good for the long-term makes the short-term look worse. This is much like what happened with Ronald Reagan in the early 1980s. Even though his policies led to a boom in the economy, the fix (especially for inflation) was a painful process.” Wesbury, Brian. “It’s Not All About Tariffs.” First Trust Monday Morning Outlook. March 10, 2025.
With the recent market volatility, the stock market is no longer overvalued. Market volatility is normal. Almost every year experiences a 10% drawdown and bounces back. Stay focused on your long term goals. Please consider getting a portfolio review to ensure a proper allocation and a plan that incorporates your goals, and stay invested for the long term. Time in the market is one of the most important factors in the success of a portfolio.