One of the most basic principles of economics is that markets don’t like uncertainty. Even if a factor contributes to growth in the long-run, its immediate results are unpredictable, investors will respond by pulling back.
The first quarter of 2025 saw a swift succession of events, each of which on its own would have been significant news. But taken together, this string of “unknowns” predictably sent the markets into negative territory. Just as investors seemed to digest a new piece of information, multiple, newer data would follow. As a result, news about tariffs, inflation, interest rates, unemployment, and extensive government cuts contributed to a period of dramatic volatility.1
Howard Silverblatt, Senior Index Analyst for S&P Dow Jones, writes, “March continued with President Trump’s rapid executive orders and policy changes, as tariffs (along with their potential impact on the economy), inflation, employment, and consumer spending became main concerns of the market, which pulled back with increased trading on strong negative breadth.”
Adding to the concern, says Silverblatt, was Elon Musk’s Depart of Government Efficiency (DOGE) cutting government jobs in addition to general U.S. layoffs. As a result, the S&P 500, which had ended January with a 2.7% gain, finished the
quarter with a loss of 4.5%.
One group that saw significant short-term corrections was technology stocks. In 2024, advances in artificial intelligence (AI) led to dramatic gains for the so -called Magnificent 7 tech stocks. But questions about the limitations of AI agents, such as
their penchant for inventing data, as well as the emergence of much cheaper alternatives, have led investors to reevaluate the long-term potential for these companies.
For example, NVIDIA, maker of the high-performance processors used in AI computing, dropped nearly $600 billion in market value in one day. This underlies the fact that even high flying companies can stumble when expectations change, a reason to avoid concentrating investments in narrow sectors.2 Of the three months comprising the first quarter, March saw the largest losses with the S&P 500 shrinking 5.63%. However, much of that was due to the embattled tech sector. Take out the losses of the Magnificent 7, and for March the index would be down 2.5%. For the entire quarter it would be down just 0.50%.
Again, the volatility showed the worth of diversification. Equities outside of U.S. stocks posted gains for the first quarter. Here are a few examples. The Bloomberg US Aggregate Bond Index gained about 2.6%. The MSCI Emerging Markets Index grew 5.7%, while the MSCI World ex-USA Index rose 9.3%. And the benchmark 10-year Treasury also gained.
However, holding a diverse portfolio, where you expect some of your assets to decline even as others beat the market, is not for everyone. It requires waiting patiently through short-term volatility—something that’s difficult to do when everyone around you is taking decisive action.
Active investors, who believe they can outperform the market through strategically timed buying and selling, attempt to counter volatility by jumping out of the market during losses and back in again during gains. Unfortunately, the unpredictable nature of the market means that it’s impossible to tell ahead of time what will be a little dip and what will be a major drop. The same goes for trying to time when equities will start to “win.”
Airline pilots know to expect turbulence. Freighter captains are prepared to sail through rough seas. And prudent, long-term investors know that volatility is inevitable. It’s simply something you routinely expect.
There’s an oft-quoted proverb that puts it succinctly: Volatility is the price of admission to the market.
Wealth manager and financial writer Ben Carlson makes this comparison: “The price of admission to Disney World is long lines, crowds of people, sore feet from all the walking, subpar food and exorbitant ticket prices that defy the laws of inflation each year.”
However, he says, “The trade-off for all of that stuff is creating wonderful memories with your family, some good beer at Epcot, a handful of good rollercoasters, ear-to- ear smiles for your kids and a family photo or 12 you can look back on fondly for years to come.”3
The prudent investor knows that the price of admission to the stock market will include days or weeks when their portfolio drops in value. It can be disheartening, especially as you’re expected to continue to add money each month. But in return for your willingness to endure this regular volatility, you gain the chance to participate in what has been for more than a century the most effective wealth- building and retirement-funding opportunity available.
One key to coping with volatility is to recognize that it’s beyond your control. You can’t do anything to avoid it or maneuver around it. It’s unpredictable—except that you can always expect it in the future.
In fact, it’s just one of many things you can’t control in your life. And once you come to that realization, it makes for less worry. Amy Morin, writing for inc., says that many people cannot accept the brutal truth that they have no control over many
things that happen in life.4 So, instead of accepting that there are many things they cannot change, they try to fool themselves into thinking they really are in control of everything.
“They think that if they can gain enough control over the people and situations they find themselves in,” she writes, “they can prevent bad things from happening.”
As an investor you don’t have to look too far to find things to worry about. In your news feed is story after story of national and global situations that threaten to wipe out the market and your nest egg along with it.
Unfortunately, when your coping mechanism is to grasp for control, you often end up causing more harm than good to your long-term progress toward retirement.
The solution isn’t to pretend that quarterly losses can’t happen. But instead to focus on what you can always control: your response.
The great stoic philosopher Epictetus expressed it this way, “When something happens, the only thing in your power is your attitude toward it. It is not the things that disturb us, but our interpretation of their significance. Things and people are not what we wish them to be nor are they what they seem to be. They are what they are.”5
When markets are in turmoil and you’re considering what to do, a great way to see things for what they truly are is to get an experienced, outside perspective. That’s a role your trusted advisor is happy to fill for you.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
10421 South Jordan Gateway, Suite 600
South Jordan, UT 84095
Sources:
1. https://www.spglobal.com/spdji/en/commentary/article/us-equities-market-
attributes/
2. https://www.dimensional.com/ca-fr/insights/quarterly-review-after-a-promising-
start-to-the-year-market-gains-fade
3. https://awealthofcommonsense.com/2022/08/the-price-of-admission/
4. https://www.inc.com/amy-morin/6-ways-to-stop-worrying-about-things-you-cant-
control.html
5. https://www.azquotes.com/quote/850822
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