Market Update: Navigating Volatility with a Long-Term Perspective

Over the past few weeks, we’ve seen increased volatility in the U.S. stock markets, particularly from the end of February into early March. Market pullbacks, while never comfortable, are a natural part of the investing cycle, and history has shown that disciplined, long-term investors are rewarded for their patience.

Market Overview

The equal-weighted index provides a better sense of how most stocks are performing since the top 10 companies in the S&P 500 represent about 34% of the index (as of late February 2025) and are disproportionately driving recent losses.

The S&P 500 has declined -9.31%, while the Nasdaq Composite has dropped -13.06% from their highs on February 19, 2025, through March 11, 2025.

However, the S&P 500 Equal Weighted Index declined by a lesser -5.99%, highlighting that the broader market is holding up better than headline indices suggest.

1. Impenetrable foliage of my trees, and but a few stray gleams.
2. A wonderful serenity has taken possession of my entire soul.
3. I should be incapable of drawing a single stroke at the present moment.

What’s Driving the Market Pullback?

Several factors have contributed to the recent market weakness:

• Shifting Investor Sentiment: Post-election optimism about deregulation and tax reductions has given way to concerns over tariffs, lingering inflation, and potential government layoffs, which could put pressure on unemployment and consumer spending.
• Tech Stock Pullback: A broad selloff in technology stocks has emerged as international competitors offer cheaper AI solutions, and investors question the timing of revenue gains from heavy AI investments.
• Political & Economic Uncertainty: Recent remarks from President Trump, where he did not rule out the possibility of a recession while enacting policy measures, have weighed on sentiment.

How We Are Positioning Portfolios & Why Long-Term Investors Should Stay the Course

Market volatility and uncertainty can be unsettling, but history has shown that sticking to a disciplined strategy is the key to long-term success. Here’s our approach:

1. We Expect Volatility to Persist, but Markets Recover Over Time
   • President Trump’s governing style is likely to cause headline risk and continued market fluctuations.
   • However, his policies are often short-term negotiating tactics, and his sensitivity to the markets may lead to adjustments if volatility continues.
   • Over time, the economy and markets tend to recover and move higher, making patience key.
2. This Could Be an Opportunity for Long-Term Investors
   • We believe investors with surplus cash (not needed for at least 3 years) can take advantage of lower prices and invest strategically while markets are down.
   • Timing the exact “bottom” of the market is impossible, so the best approach is to invest when valuations have come down significantly and be patient through short-term fluctuations.
3. We Are Focused on High-Quality, Diversified Investing
   • Our portfolios are overweight in profitable, dividend-paying companies with manageable debt—rather than relying too heavily on a few large tech stocks that have driven recent index declines.
   • This type of portfolio historically recovers faster than the broader market and allows investors to wait out volatility while benefiting from dividends.
4. The Economy Remains Fundamentally Strong
   • Unemployment remains low, and today’s inflation data shows further softening, which could support the case for future Federal Reserve rate cuts.

Final Thoughts

Market downturns, while challenging, often present attractive investment opportunities for those who maintain a long-term perspective. As history has shown, the biggest mistake investors make is trying to time the market rather than staying invested through cycles.

If you have any questions or would like to discuss how the current market environment impacts your portfolio, please feel free to reach out. As always, we appreciate your trust and remain committed to helping you navigate these market conditions with confidence.