Hello everyone, and welcome back to our quarterly market update. I’m Danny Lacey, and today we’re diving into what happened during the first quarter of 2025 and—more importantly—what it means for your investment strategy moving forward.
What Happened: 1Q 2025 Market Review
The past quarter has been quite the wake-up call after two years of relatively smooth sailing. Let’s break down what happened:
- Tariffs upended the rosy outlook for stocks, sending the market down more than 4% in the first quarter—making it the worst start to a year since 2022.
- Technology stocks were hit particularly hard, posting their worst first quarter since 2020. But there was a silver lining: value stocks and defensive sectors like healthcare actually saw gains.
- Not all stocks were down. Large Cap Value up 5.8% in Q1
- Looking beyond our borders, non-US stock markets significantly outperformed US stocks, with notable rallies in Chinese and European markets.
- Bonds became a safe haven for many investors, with prices rising despite the Federal Reserve holding off on cutting interest rates.
The market conversation has dramatically shifted. Just months ago, everyone was discussing a “soft landing” for the economy and anticipated Fed rate cuts. Now, President Trump’s trade wars have investors worried about tariffs reviving inflation, potentially collapsing consumer confidence, and increasing recession risks.
Our Message: Focus on What We Can Control
When markets become volatile like this, it’s natural to feel uneasy. You might feel tempted to take immediate action. However, perspective is our most valuable asset right now. Let me share some thoughts:
Volatility and uncertainty are simply the price of admission to the stock market. They’re normal parts of investing—not exceptions to the rule.
Looking at market history, we typically see downside trends averaging about 15% each year. Yet over many decades, the stock market has returned around 10% annually.
This reinforces an important truth: without some short-term pain or heightened volatility, we cannot expect long-term gains.
Practical Steps During Market Turbulence
Rather than reacting emotionally, here are some constructive actions to consider:
First, revisit your financial plan. If you need cash for expenses in the next 2-3 years, it may make sense to reallocate some assets into short-term investments like Treasury bills, money market funds, or other cash equivalents.
Second, consider tax loss harvesting—swapping high-risk positions into similar, but more diversified allocations.
Third, if you happen to have excess cash on the sidelines, think about dollar-cost averaging into stocks during this downturn.
The Power of Long-Term Thinking
Try to maintain a long-term perspective. Having a framework for your assets is crucial:
Divide your investments based on short-term versus long-term goals. Your retirement accounts—401(k)s, TSPs, and the like—are designed for the long haul, typically 10-15 years or more.
Don’t treat these long-term assets like they’re 12-month investments. Stay the course with your retirement portfolio allocations if your fundamental plan remains sound.
And finally, sometimes the best investment strategy is to get your mind off the constant news cycle. Go for a run, take a walk, or enjoy a bike ride. Some fresh spring air can do wonders for your perspective.
Remember, market volatility is temporary, but hasty decisions can have permanent consequences. With patience and discipline, we’ll navigate these waters together.
I’m Danny Lacey, and I’ll see you next quarter. Until then, stay focused on what truly matters.
