If you had pulled a Rip Van Winkle and slept through the first five months of 2025, you’d wake up to some crazy headlines and wonder what all the fuss was about.
The S&P 500 is up about 1% through May while the broader global measure of stocks the ACWI (All Country World Index which includes both U.S. and International stocks) is up 5%. Kind of a boring year, right?
Anything but! The S&P 500 was down 18.76% at its worst point in April while the ACWI was off 16.55%.
Between January and June, we saw…
- A tariff war
- Extreme investor anxiety
- The potential threat of massive new budget deficits
- Recession fears
- A downgrade of the U.S. credit outlook by Moody’s
- Sticky inflation and persistent high interest rates
Waking up on June 1st, you’d see markets took a round trip and turned up for the year. But if you were awake for all of it, it didn’t feel like a smooth ride.
The Case for Staying Calm Under Pressure
"Compounding doesn’t rely on earning the highest returns. Merely good returns sustained uninterrupted for the longest period of time – especially in times of chaos – will always win."
– Morgan Housel, “The Psychology of Money”
When volatility spiked in April, we leaned into our communication efforts. Ryan shared a quick video explaining why volatility in stocks is normal… and even expected in exchange for the attractive long-term returns that have come from owning stocks. He emphasized, using data, how jumping in and out of stocks can backfire — especially when the best market days tend to cluster around the worst ones.
That’s why we encouraged you to stay the course. Volatility was expected, and recoveries often follow fast.
At its peak of crazy, the S&P 500 was down 10.5% over just two days. Just a few days later, the S&P 500 rebounded by 9.5%...in a single day.
We’ve shared this chart in one form or another before, but there’s danger in panic-selling stocks during a sharp downturn. Most of the best days in the market occur just after the worst days in the market. And if an investor missed just the 10 best days in the market between 2005 and 2024 (out of ~2,520 trading days), the difference in returns is dramatic.
The total average annual return is reduced from 10.4% to just 6.1%.
Investors who stayed invested over this period and tuned out the noise, didn’t interrupt compounding.
Not a Victory Lap — Just a Pat on Your Back
We're not saying it’s over or markets will only go up from here. There’s plenty more that will potentially rattle markets this year:
- Tariff uncertainty
- The end of the bromance between Trump and Elon
- Political tension
- Deficit concerns
- Rate pressures
- The unforeseen risk no one is prepared for
Market gyrations are normal. The price of admission for long-term returns is short-term discomfort.
Trying to sidestep that discomfort can be costly.
Hats off to you for being patient over this most recent stretch.
Bottom Line
You don’t need to sleep through the rest of the year — but you can rest easy knowing your plan is built for whatever comes next.
Because like any other year, there are always headlines to worry about. But if you’re working with us there’s also a long-term plan in place and a team here to keep you on track.
As always, if you want to talk through your plan, portfolio, or the current market landscape, we’re here.
Enjoy your summer!
Brian