Markets don’t move in a straight line, and after two strong years, we’ve been expecting an increase in volatility. The biggest pullback in US stocks in 2023 was 10% and in 2024 it was about 8.5%, far below the historical average correction of 14%1. Now, it’s time for a reset.
This time around, the excuse is tariffs. While market narratives always have a trigger—geopolitical events, economic data, Fed policy—the reality is that trees don’t grow to the sky. Pullbacks are normal, even healthy, as they reset expectations and shake out speculation.
We spoke at length about this at our Economic Outlook Breakfast: 2025 will likely bring more market turbulence. But whether or not these new tariffs stick, or are quickly reversed, isn’t the real issue. The market was overdue for a breather, and we’re seeing it unfold.
What’s not being talked about enough? Diversification is working. While the growth side of the S&P 500 is down almost 3%, value stocks are up 4.25%. International developed equities? Up nearly 8% so far this year. And let’s not forget bonds—the U.S. Aggregate Bond Index is also up 3% year-to-date2.
Summary: U.S. growth down a little, U.S. value up, international stocks up, and bonds up. This reinforces why maintaining a well-balanced portfolio matters, especially when markets get choppy.
If you want to dig into a brief data-based analysis on the potential economic implications from tariffs, read here: The Return of Tariffswhere we’ve put together some excellent commentary with the “quant nerds” at Helios Quantitative Research.
As always, our focus remains on long-term fundamentals, not short-term noise.
If you’ve been sitting on extra cash waiting for a decent entry point, this could be a good spot to put some money to work.
Reach out if you’d like to discuss this together.
Happy planning,
Brian
1. Data from YCharts as of 03/03/2025, SPY,
2. Data from YCharts as of 03/03/2025, SPYG, VOO, SCHF, AGG