Markets have been on a roller coaster, and investors are asking:¹

Is a bear market on the way?

 

Let’s dive into what’s happening and what it might mean for your portfolio.

What’s driving these market swings?

In a word: uncertainty.

Anxiety over a potential trade war is causing a significant shift in business sentiment, with many corporate leaders bracing for a potential recession later this year.²

It’s a dramatic (and concerning) change from the outlook just a few months ago.

Three key worries seem to be driving markets:

1. Tariff uncertainty is causing anxiety – Analysts are concerned that widespread tariffs could increase costs and disrupt many industries.

However, recent remarks from the administration hint at a more flexible approach to negotiations that could blunt the full impact of tariffs.³

2. Sticky inflation persists – Many economists don’t expect us to hit the Fed’s 2% target until 2026 or later.²

If inflation doesn’t moderate, the Fed may get cold feet about lowering interest rates further.

3. Consumer spending is slowing – Fresh data shows Americans are tightening their belts as inflation and economic worries bite.⁴

Since consumer spending drives nearly 70% of the economy, this pullback raises real concerns.

Are there potential bright spots despite the noise?

The recent market bounce tells us something important: investors are ready to respond positively to policy clarity.

The push to strengthen domestic production could also unlock new opportunities in some sectors of the economy.

Our job is to spot those opportunities and stay nimble enough to use them when they emerge.

What could this mean for your portfolio?

Market volatility can be unsettling, especially alongside economic uncertainty. It’s perfectly normal to feel concerned when headlines turn gloomy.

We don’t know what will happen next, but I know this: Emotional reactions to market movements often lead to missed opportunities.

If you’re worried about what’s going on, please reach out—our role is to be your guide, thought partner, and a source of reassurance and perspective.

Your investment strategy was designed to account for market fluctuations.

 

Sources:

1. https://www.cnbc.com/2025/03/24/stock-market-today-live-updates.html

2. https://www.cnbc.com/2025/03/25/recession-is-coming-pessimistic-corporate-cfos-say-cnbc-survey.html

3. https://www.cnbc.com/2025/03/25/cnbc-daily-open-trump-winks-at-gentler-tariffs-boosting-markets.html

4. https://www.reuters.com/world/us/us-consumers-slow-spending-inflation-bites-synchrony-says-2025-03-25/

After reaching new record highs in recent weeks, markets plunged on worries that cheaper AI competition from China could pose risks to U.S. tech companies.¹

What caused the market reaction?

Let’s dive in.

What caused the tech market crash?

Much of the market run-up over the last two years has been driven by AI mania, with U.S. companies leading the charge.

However, this narrative faced a test when DeepSeek, a Chinese tech startup, released an advanced (much cheaper) AI model.

DeepSeek claims it was able to develop its advanced model for just $6 million using fewer hard-to-find computer chips, compared to the hundreds of billions collectively invested by U.S. rivals to develop their own AI models.¹

If the buzz around DeepSeek R&D numbers turns out to be more than just hype, it raises questions about the efficiency and competitiveness of U.S.-based AI firms.

Why are AI models so expensive to train?

That is the trillion-dollar question.

The rising costs of AI development have been a key focus for investors.

Capital spending on AI model development is soaring, driven by the cost of the massive computing power needed to analyze data.²

The chart below shows the estimated costs to train some of the major models released over the last few years.

One major tech CEO estimated that training advanced AI models could cost anywhere from $10 billion to $100 billion.³

In contrast, DeepSeek claims to have developed its model for a fraction of the cost by using innovative ways to process data using fewer resources.

If their approach is validated, it shows that there may be alternative paths to AI innovation that require less upfront investment.

What will this AI “space race” mean for U.S. AI companies?

While the long-term potential for AI could be massive, it’s still a very new technology with a rapidly evolving landscape and not a lot of return to show for substantial investments.⁴

If DeepSeek’s approach can be replicated, the disruption could benefit the sector by making it faster and cheaper to release new models.

The new pressure would also force competitors to become more efficient in their operations.

Will the tech selloff trigger a bear market?

Market adjustments like this are not unusual, particularly after periods of strong performance.

Stocks have been riding high on soaring tech firm valuations, and the pullback could be the reset the sector needs to return to Earth.

Looking ahead, we can expect more volatility as investors adjust expectations and digest new data.

Bear markets are always a risk, and it’s wise to stay flexible and be prepared for one to strike.

That said, we see plenty of growth opportunities ahead despite the short-term uncertainty.

As always, we’re watching closely and monitoring trends.

 

Sources

1. CNBC, 2025 [URL: https://www.cnbc.com/2025/01/27/how-the-buzz-around-chinese-ai-model-deepseek-sparked-a-massive-nasdaq-sell-off.html]

2. Stanford, 2024 [URL: https://aiindex.stanford.edu/wp-content/uploads/2024/05/HAI_AI-Index-Report-2024.pdf]

3. IBD, 2024 [URL: https://www.investors.com/news/technology/ai-stocks-openai-artificial-intelligence-models-big-tech-google-meta/]

4. Goldman Sachs, 2024 [URL: https://www.goldmansachs.com/images/migrated/insights/pages/gs-research/gen-ai–too-much-spend,-too-little-benefit-/TOM_AI 2.0_ForRedaction.pdf]

Chart sources:

Stanford, 2024 [URL: https://aiindex.stanford.edu/wp-content/uploads/2024/05/HAI_AI-Index-Report-2024.pdf]

CNN, 2025 [URL: https://www.cnn.com/2025/01/27/tech/deepseek-stocks-ai-china/index.html]

Now that the election is over, what will the new administration prioritize in the new year?

Here are a few things we’re watching in the months ahead:

The debt ceiling debate may reignite in early 2025.

The debt ceiling, the cap on the total amount of debt the U.S. can hold, has been suspended as part of a deal made in the last Congressional fight.¹

When the cap returns in January, it may kick off a fresh round of debates and draw attention to the more than $35 trillion the U.S. holds in debt.²

Will lawmakers take action to stem deficit spending? Or will they continue to kick the can down the road?

We’ll have to wait and see.

Tax cuts may be extended past 2025.

A number of popular individual and small business tax breaks are scheduled to expire at the end of 2025, which would trigger higher individual income tax rates and increase estate taxes.³

President-elect Trump may extend or make some or all of these provisions permanent as part of his 2025 priorities.

However, tax cuts lead to lost revenue for the federal government, which would end up adding to the national debt.

It’s hard to know how lawmakers will square these competing priorities, but we’re keeping a close eye on it and will keep you informed.

Tariffs could become a key issue for businesses.

The new administration has announced plans for broad tariffs on imports, especially on goods from China.⁴

Tariffs can impact inflation and business earnings by increasing the cost of goods and supplies from overseas.

If trading partners respond by adding their own tariffs on U.S. goods, it could hurt overseas demand by making our products more expensive.

How deep or broad those tariffs could be is a big source of uncertainty going into the new year.

However, it’s likely that any new policies would come with many rounds of debate, so the actual impact of tariffs may be much less than the worst-case scenarios.

We’ll keep you updated.

Markets may become volatile with uncertainty.

While the uncertainty of the election has faded, new uncertainty around policy priorities has replaced it.

We’re expecting volatility ahead as analysts digest reports and adjust their positions ahead of the new year.

Investors are also watching data for hints about where the economy is headed next.

The bull market is now over two years old. Should we be worried that a bear market is around the corner?

Probably not.

The chart below shows you the average age of recent bull markets.

While the past doesn’t predict the future, we can see that two years isn’t historically long for a bull market. In fact, the longest bull market on record lasted more than 12 years.⁵

A sudden turn to a bear market is not likely at this point.

On the other hand, there are a lot of risks in this environment that could shake things up.

If geopolitical issues flare, inflation rebounds, or the business environment starts to look dicey, we can expect markets to correct.

 

Sources:

1. https://bipartisanpolicy.org/blog/debt-limit-2025-treasury-cash-on-hand/

2. https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/

3. https://tax.thomsonreuters.com/blog/what-to-know-about-tcja-expiration/

4. https://www.yahoo.com/news/trumps-proposed-tariffs-raise-prices-205300785.html

5. https://www.hartfordfunds.com/practice-management/client-conversations/investing-for-growth/10-things-you-should-know-about-bull-markets.html

Chart sources: https://finance.yahoo.com/news/the-bull-market-is-2-years-old-heres-where-wall-street-thinks-stocks-go-next-100050648.html?guccounter=1

*Current bull market as of 11/20/24

The bull market has officially turned two.

Markets have also had an impressive run since the bottom of the bear market.

Since October 12, 2022, the S&P 500 has gained over 60%.¹

Can the bulls keep running?

Given the strong performance in 2023 and the strong 2024 we’re having, it’s reasonable to worry that markets might retreat.

You can see in the chart below that consecutive strong years have happened before.²

That said, past performance doesn’t guarantee that optimists will continue to drive markets.

In fact, it wouldn’t be a surprise to see a pullback ahead.

However, there’s reason to hope for continued optimism.

The bull run we’ve experienced this year has a strong grounding in economic factors.

Factor #1: A growing economy generally boosts markets.

While markets are often impacted by short-term trends and investor psychology, stocks generally follow the economy.

The latest data shows that economists are upbeat about where economic growth is headed.³

Since the stock market is forward-looking, that’s a positive for the bulls.

Factor #2: The Federal Reserve’s interest rate policy is loosening.

A big part of the market story this year is the hope that the Fed will be able to lower interest rates without causing inflation to spike or tipping the economy into recession.

Lower interest rates are generally positive for markets because they make it cheaper for firms and consumers to borrow money.

Lower corporate borrowing costs can fuel growth, R&D, acquisitions, and other capital-intensive projects that boost stock prices.

Factor #3: Optimism about corporate earnings.

While earnings season is still underway, the general consensus is that corporate earnings are looking solid so far.⁴

That’s great news for markets.

A recent survey of corporate leaders also found that the majority expect company profits to increase.⁵

Taken together, that’s a positive for the bulls.

However, there are a number of risks we’re watching.

With markets regularly testing new highs, stock valuations are also high.

That means some stocks may be overvalued.

If investors lose optimism about growth, markets will likely retreat.

Uncertainty surrounding American politics and global geopolitics is also high.

While elections and conflicts generally don’t have long-term effects on markets, they can certainly trigger selloffs.⁶

Overall, we’re still cautiously optimistic about where markets are going in the final months of the year.

It can be tempting to look at market highs and decide to sell and stand on the sidelines.

However, timing markets perfectly is impossible and you risk missing out on future growth.

 

Sources

1. https://finance.yahoo.com/news/the-bull-market-is-2-years-old-heres-where-wall-street-thinks-stocks-go-next-100050648.html

2. https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

3. https://www.wsj.com/economy/economists-predictions-survey-charts-68ba82d6?mod=article_inline

4. https://www.nasdaq.com/articles/stocks-edge-higher-solid-corporate-earnings-boost-market-optimism

5. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/survey-results-expectations-for-company-performance-by-industry

6. https://www.nytimes.com/2024/10/15/business/stock-market-valuation-outlook.html

Chart sources: https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

A lot has happened recently.

After weeks of gains, markets slid as investors took a step back from big technology stocks.¹

At the same time, a global IT outage took major corporations offline across the world.

President Joe Biden withdrew from the election, injecting more uncertainty into the tight race.²

A shooter came close to assassinating Donald Trump at a campaign rally.³

What could all this mean for investors? Let’s discuss.

Crowdstrike, a global IT outsourcing company, took millions of Windows devices offline with a bad update.

Despite causing hours and days of chaos for airlines, banks, hospitals, and other companies, the economic impact of the outage is likely to be muted.⁴

However, it shows just how interconnected and fragile our technology infrastructure can be.

Markets bounced back quickly from the tech-triggered slide.²

It’s pretty common for markets to recover from a slide when overall sentiment or fundamentals haven’t shifted

In this case, the quick correction was mostly concentrated in the tech sector and was related to investors shifting their positions away from some of the sector’s biggest winners.

Let’s use this as a teachable moment:

One of the challenges of being a long-term investor is accepting down days and weeks. 

Investors who panic and sell miss out on the strong market days that often follow.

While markets rebounded back quickly this time, that’s not guaranteed.

We’re expecting markets to remain volatile as investors position themselves ahead of major earnings reports and economic data.

What could a new Democratic presidential candidate mean for investors?

In the short term, extra uncertainty around the election could stoke volatility as traders revisit their bets.

However, in the medium to long term, the election isn’t likely to have much impact on markets at all – despite what the headlines might tell you.

Here’s a quick look at how the S&P 500 performed when each party held the White House.

As you can see, markets grew regardless of which party held the presidency.⁵

And – markets did better with a divided Congress.

That’s likely because a legislative branch split between parties makes it harder to pass new tax laws or other legislation that could affect business performance.

Bottom line: market fundamentals haven’t significantly changed but we expect more volatility ahead.

We’re watching the market and economic data closely and we’ll keep you informed along the way.

 

Sources:

1. https://finance.yahoo.com/news/asian-stocks-track-us-decline-224153088.html

2. https://finance.yahoo.com/news/stock-market-news-today-tech-roars-back-as-sp-500-nasdaq-surge-ahead-of-earnings-200038261.html

3. https://www.cnn.com/2024/07/23/politics/pennsylvania-state-police-commissioner-reveals-stunning-info-about-trump-shooting/index.html

4. https://www.usatoday.com/story/money/investing/2024/07/19/us-stocks-uninterrupted-crowdstrike-outage/74469633007/

5. https://get.ycharts.com/resources/blog/an-advisors-guide-to-elections-and-the-markets/

Chart sources: https://get.ycharts.com/resources/blog/an-advisors-guide-to-elections-and-the-markets/

Markets have been very volatile lately.

What’s going on?

Let’s take a quick look at the factors that are influencing markets right now.

1. The bull market narrative has shifted

For months, investors have told a “Goldilocks” story of a strong economy, tamed inflation, and interest rates that were soon to drop.

However, stronger-than-expected economic data and sticky inflation have now complicated the story, and investors have become wary.¹

There are still plenty of reasons to be optimistic, but investors are being careful and taking in earnings data to gauge the upside potential of the next weeks and months.

2. Interest rates are likely to stay higher longer than we expected (or wanted)

A strong economy and hot inflation mean the Fed is now getting cold feet about cutting interest rates.²

Recent comments by Fed chair Jerome Powell suggest the Fed will keep rates high until economists are confident inflation is fully in reverse.

Some analysts are even pricing in the odds of another rate hike if inflation continues to remain high.³

Since investors have been banking on rate cuts coming soon, the new “higher for longer” reality is causing them to reevaluate their positions, further stoking volatility.

3. Geopolitical flare-ups are causing tensions to rise

With Israel and Iran trading attacks and a spring offensive gearing up in Ukraine, there are plenty of geopolitical worries, sadly.

Some good news (if there is any good news when so many lives are at stake) is that geopolitical shocks typically only have a temporary impact on markets.⁴

We don’t know what lies ahead, but we hope and pray for a peaceful end to the violence.

Volatility is normal after a prolonged rally

Here’s the bottom line: volatility after a strong rally is very common.

Especially at the beginning of a new quarter when investors are digesting earnings reports from the previous quarter and reassessing company performance.

Our crystal ball is in the shop, so we can’t tell you with certainty what happens next.

However, given that the U.S. economy remains healthy, with a strong jobs market and robust consumer spending, we don’t see a major risk of a correction turning into a serious downturn.⁵

Have questions? Want to talk through some concerns?   Please don’t hesitate to reach out.

 

Sources:

1. https://www.fanniemae.com/newsroom/fannie-mae-news/hot-economy-inflation-likely-keep-rates-higher-longer

2. https://apnews.com/article/inflation-interest-rates-federal-reserve-powell-cuts-c60436c5e719ce95fc487fdb98395d09

3. https://www.ft.com/content/8c5da64b-766e-4993-86f5-aac95342432a

4. https://www.morningstar.com/news/marketwatch/20240422136/history-says-stock-market-dips-caused-by-geopolitical-turmoil-should-be-bought-not-sold

5. https://www.usnews.com/news/economy/articles/2024-04-22/gdp-inflation-highlight-week-of-economic-data

 

The stock market rocketed to new record highs after the latest Federal Reserve meeting.¹

Will markets continue to rise?

Will stocks take a dive after the recent record highs?

What could the Baltimore bridge collapse mean for the economy?

Let’s discuss.

Why are stocks on such a tear?

Despite some bumps in the road, markets have been on an extended rally that has gone on for months, notching new record highs along the way.¹

Two major factors are fueling the gains:

1. The expectation of interest rate cuts (soon)

2. Enthusiasm for tech and AI stocks

The latest Fed meeting ended with investors concluding that policymakers are serious about cutting interest rates this summer (as long as inflation data continues to trend downward).²

The Fed’s official position is that it expects to cut rates at least once this year (some Fed officials want to cut rates two or even three times).³

Investors expect lower rates to bolster the economy by making it cheaper and easier for consumers and businesses to spend, build, and grow.

Will stocks continue to rally?

Many analysts think there’s still plenty of room for stock prices to rise this year because they believe the rally is fueled by expectations of healthy economic growth.

The chart below shows some analysts’ 2024 year-end forecasts for the S&P 500 index.⁴

While you can see a few analysts are less bullish than the others, many are predicting a strong year for stocks.

Will they prove correct? Our crystal ball is in the shop so we’ll have to wait and see.

Is a correction coming?

Corrections are always possible, especially after markets reach new highs.

Much of the current rally’s steam comes from expecting interest rates to fall soon.

We should expect a pullback if inflation data comes in hotter than expected or traders think the Fed might be getting cold feet.

Technology stocks (another pillar of the rally) are also typically interest-rate sensitive since many tech companies rely on debt to fund operations (and may not produce immediate profits).⁵

Could the Baltimore bridge collapse impact the economy?

It’s not yet clear the extent to which the sudden bridge collapse and port shutdown could impact supply chains or inflation.

It’s also hard to fully reckon the human tragedy of lives lost when the bridge fell, and lives disrupted by the aftermath.

The Port of Baltimore is one of the busiest ports on the East Coast, and is a major hub for coal, sugar, and vehicles.⁶

The port’s closure may impact global coal prices as well as supply chains for cars, trucks, and other goods.

We’ll know more in the weeks and months to come.

Bottom line: The rally is looking healthy and could continue, but we expect pullbacks as investors take profits and digest new data.

As always, we’re watching and preparing for the different scenarios that could play out this year.

 

Sources:

1. https://www.cnbc.com/2024/03/24/stock-market-today-live-updates.html

2. https://www.cnbc.com/2024/03/20/fed-meeting-today-live-updates-on-march-fed-rate-decision.html

3. https://www.cnn.com/2024/03/26/economy/fed-officials-fewer-rate-cuts-this-year/index.html

4. https://finance.yahoo.com/news/wall-streets-most-bullish-strategist-cites-a-big-surprise-pushing-stocks-higher-morning-brief-100051265.html

5. https://www.nasdaq.com/articles/can-big-tech-stocks-thrive-in-a-higher-interest-rate-environment

6. https://www.wsj.com/finance/baltimore-bridge-economic-impact-0514d05a

Chart sources:

1. https://finance.yahoo.com/news/wall-streets-most-bullish-strategist-cites-a-big-surprise-pushing-stocks-higher-morning-brief-100051265.html

2. https://www.wsj.com/finance/baltimore-bridge-economic-impact-0514d05a, https://www.eia.gov/coal/production/quarterly/pdf/t13p01p1.pdf

It’s official. The bear market is behind us.

The S&P 500 finally hit a new record for the first time since 2022. And then notched multiple higher highs in the days that followed.¹

That means it has passed the final bar to formalize the bull market in stocks that started after the October 2022 market low.²

What’s a bull market? 

Though there’s no official designation, “bull market” is a handy nickname for a period of generally rising markets.

Bull markets get called when a) markets rise at least 20% above the most recent market bottom and b) reach and surpass the previous market high.

It can get a bit confusing since sometimes we’re in a bull market but don’t “officially” call it until later.

Let’s take a moment to celebrate a milestone.

(I’ll wait.)

Does this mean all stocks are rising?

No. An index like the S&P 500 represents a portion of the market and is useful for tracking trends over time.

The performance of individual stocks is affected by the earnings and expectations of the underlying companies and other factors that may not apply to the overall market.

So, what happens next?

If we look at the history of bull markets, we can expect markets to continue to rise.

The last two bull markets (from 2009-2020 and 2020-2022) lasted 132 months and 21 months, respectively.³

On the other hand, there are reasons to be cautious.

For one, the past doesn’t predict the future.

Pullbacks happen regularly and it’s common to see a drop after pushing new highs as investors take profits.

And we know investor optimism can flip to negativity quickly when fresh headlines arrive.

The year has kicked off with lingering uncertainties about inflation, interest rates, and the economy that could drag on market performance.⁴

Here’s a chart that shows intra-year dips in the S&P 500 alongside annual performance. 

(Take a look at the red circles to see the market drops each year.)

The big takeaway? In 16 of the last 24 years, markets have dropped at least 10%.⁵

Even in years with powerful performance, markets typically experience a pullback or two.

For right now, we have some excellent economic news to celebrate.

The economy grew much faster than expected at the end of 2023.

The U.S. economy grew 3.3% (annualized) in the fourth quarter—much higher than the 2% expected—though still slowing from 4.9% growth in Q3.⁶

Consumer spending was strong, indicating Americans are feeling optimistic enough to keep shopping.

There’s also encouraging data on inflation.

The Personal Consumption Expenditures (PCE) index shows inflation rose just 2.7% in 2023 overall, down from 5.9% a year ago. That’s a significant decrease in overall inflation.⁶

Taken together, that means the economy is still growing while inflation continues to moderate, which is exactly what economists hoped would happen.

Bottom line: we’re seeing positive developments but remaining cautious. We’re keeping an eye on markets and will be in touch with updates as needed.

 

Sources:

1. https://www.reuters.com/markets/us/futures-stall-ahead-economic-data-tesla-slides-growth-warning-2024-01-25/

2. https://www.nytimes.com/2024/01/19/business/stocks-bull-market.html

3. https://www.forbes.com/advisor/investing/bull-market-history/

4. https://www.morganstanley.com/ideas/are-we-in-a-bull-market-2024

5. https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/guide-to-the-markets/mi-guide-to-the-markets-us.pdf

6. https://www.cnbc.com/2024/01/24/stock-market-today-live-updates.html

Chart source: https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/market-insights/guide-to-the-markets/mi-guide-to-the-markets-us.pdf

What’s going on with markets?

Why does the federal government keep getting into fiscal fights?

A lot is going on, so let’s discuss.

Why did markets melt down?

A combination of things.

Some negative news about home sales and consumer confidence created fresh concerns about the state of the economy. [1]

The reality of what high interest rates (that may go even higher this year) could mean for corporate profits is also setting in.

Companies that have to refinance corporate debt at higher rates could see much higher interest payments, cutting into their performance.

And on top of all that is the latest round of fiscal drama in Washington.

All that uncertainty pushed markets into fear and selling mode.

What are markets going to do next?

That’s hard to say.

Markets often bounce after a selloff as traders buy the dip.

We’re kicking off a new quarter and positive news could cause stocks to rally.

However, bearish selling pressure could continue as investors recalibrate their expectations about how long higher interest rates could linger.

So, what’s behind the ongoing budgetary drama in Washington?

Phew. It’s complicated.

Many economists and politicians agree that federal spending needs to be reined in.

The problem is that no one agrees on when and where to cut.

The U.S. has a pretty big deficit issue.

The Congressional Budget Office (CBO) projects that the federal deficit will rise to nearly $3 trillion per year in the 2030s, up from about $1.4 trillion in 2022. [2]

That large gap will continually add to the overall national debt (and interest payments) until it’s addressed.

 

Critical deadlines like the passage of spending bills (or raising the debt ceiling) offer an opportunity for politicians to force a standoff.

If federal spending needs to be cut, are budget showdowns actually that bad?

Fiscal crises aren’t good for the economy or markets.

Government shutdowns are disruptive as offices close down, troops and workers go without pay, and regular government processes stop.

Debt ceiling standoffs risk defaulting on sovereign debt, which would spill over into global financial markets.

The CBO estimated that the 2018-2019 shutdown cost the economy $11 billion, $3 billion of which was never regained by future spending. [3]

Even near-misses can be costly as they inject uncertainty and distrust about government processes.

In its August downgrade of U.S. credit, Fitch Ratings emphasized its concern about how political polarization affects regular government processes in Washington. [4]

Here’s the bottom line: the long-term effects of the latest crisis are likely to be muted.

There are a lot of factors (positive and negative) driving markets and this is just one of them.

However, we’re likely to see a lot of volatility ahead as investors digest economic data and judge recession risks.

 

Sources:

1. https://www.cnbc.com/2023/09/25/stock-market-today-live-updates.html

2. https://www.cbo.gov/publication/58946#_idTextAnchor004

3. https://www.reuters.com/world/us/shutdown-default-washingtons-risky-new-debt-ceiling-standoff-2023-01-24/

4. https://www.cnn.com/2023/09/25/economy/moodys-us-government-shutdown-credit-rating/index.html

Chart sources: https://www.cbo.gov/publication/58888

Let’s talk about markets for a minute.

The most recent inflation data shows that inflation continues to persist near recent highs.¹

The trend makes it likely that the Federal Reserve will raise interest rates again in November.²

Does that mean a recession is inevitable? Are we past the bottom or are markets going to fall further?

It’s hard to say.

We won’t know for sure how things will play out until long after current events are in the rearview mirror.

However, the uncertainty won’t stop the media from churning out scary headlines and flawed predictions.

Instead of speculating wildly about what the future brings, what if we look for lessons and guidelines we can follow?

4 Lessons About Life

1. Count your blessings. There is so much in our lives to be grateful for.
2. Cherish your most important relationships. They’re what truly matters, especially when the road gets rocky.
3. When you think of something positive about someone, tell them right away. It might be exactly what they needed to hear today.
4. “Experience is what you get when you didn’t get what you wanted.”³ (Randy Pausch said this. His book, “The Last Lecture” is well worth a read.)

5 Lessons About Markets

1. Markets can keep falling for a lot longer than we’d like.
2. Market bottoms don’t come with an all-clear signal, and missing the best days of the market can really shockingly damage your long-term growth.
3. Don’t panic and make sudden decisions. One bad decision can destroy years of good ones.
4. Stocks historically deliver strong growth over time.⁴ But you only benefit from it if you can withstand the painful periods that come with the territory.
5. You can’t avoid all risks. You CAN identify them, manage them, and focus on what’s in your control. (That’s what I’m here for!)

Here’s the bottom line: Reaping the rewards of long-term investing means taking the good times along with the bad.

The end of a bear market looks an awful lot like the middle, and investors who panic, sell, and miss the ride back up regret it.

That’s because the best days and worst market days tend to cluster.⁵ Sit the bear market out, and you’re likely to miss out on the whole play.

 

Sources

1. https://www.cnbc.com/2022/10/13/consumer-price-index-september-2022-.html

2. https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

3. https://www.goodreads.com/quotes/48126-experience-is-what-you-get-when-you-didn-t-get-what

4. https://equitable.com/retirement/articles/inflation-and-long-term-investing

5. https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/timing-the-market-is-impossible.html

Chart Source: https://www.putnam.com/literature/pdf/II508.pdf