By No matter your level of investment or where you are in your retirement journey, the first quarter of 2025 has probably felt chaotic. We’ve been drinking from a fire hose with many headlines and announcements flying around. If you had looked at your statement from January, you likely would have felt pretty good. Mid-March, you probably started thinking, what’s going on here? Do I need to make some adjustments?
I wrote back in November about how, while I am optimistic about the market’s future, this year’s puzzle was going to be unusually difficult to piece together. And that has played out. The market is on edge because Wall Street can’t take everything happening worldwide and place it into a perfect box. These sudden changes create worry, and the unknown beckons volatility.
The changes in leadership in Washington and subsequent news on tariffs, job cuts done in a way that no Federal employee feels secure, not sticky but now “transitory inflation” (the Fed had led us to believe this was over), and plummeting consumer confidence have all added to that feeling of anxiety on not just Wall Street, but Main Street. Toss in the renaming of a gulf, the idea of taking over Greenland, American business buying up significant interest in operations of the Panama Canal, and the rhetoric around annexing Canada, and it’s enough to give the average person fits.
The main question I’m getting is, do we need to make any account changes because of this volatility? We have already made many of those changes for our current clients in 2024, knowing that 2025 would be challenging. We continued to rebalance accounts and raise cash in early 2025, and we raised cash again as the initial tariff announcements grew in size and scope. Just like in November, when Trump won and markets rallied, wildly anticipating all sorts of wonderful things that would happen in a Trump presidency, I think what we’ve experienced in the first quarter is the old saying — be careful what you wish for, because you just might get it.
Don’t take that as support or condemnation of the administration’s policies. Even if you disagree with some of the decisions, there are valid reasons for pursuing trade deals, reinforcing supply chain routes in Panama and the North Sea, and loosening our dependence on Chinese cargo ships. My point is — no White House is going to magically keep the stock market on an upward trajectory in perpetuity. The key factors to drive that are solid leadership from our corporations and earnings showing America’s strength in banking, technology, commerce and innovation.
While we’ve changed administrations, we have not changed corporate America’s agenda. Right now, President Trump is thrusting us into a worldwide negotiation over what everybody is charging everybody. Like any negotiation, Americans want to win. Corporate America wants to win, and those wins will eventually be reflected in the movement of the stock market. But right now, there are many opinions on all sides on how this should be done.
In previous generations, we could afford to support the whole world and pay tariffs (some excessive, some not). Now, with a deficit of $31 trillion, it’s in our best interest to focus on things that will increase cash flow to consumers, reduce our national debt, and set ourselves up to eventually balance our budget.
While many are angry at President Trump for bringing up this tariff discussion, it has needed to happen for years. The White House’s facts, figures, and math may be off, and the approach may be deemed despicable, but, at the same time, I can appreciate a conversation occurring from nation to nation that doesn’t get tied up in the personal interests of our representatives in Congress.
The volatility? When Wall Street can’t use its spreadsheets to accurately value companies’ future earnings, we experience volatility. It’s messy and unorganized. It’s hard for Fortune 500 CFOs to give accurate projections of their margins for the rest of the year when they don’t know the cost of goods and services or from what countries they can procure what is needed.
Do I understand why consumer confidence is so low? Absolutely. But I also know that the markets are made up of corporations doing everything they can to make money for themselves and their shareholders. So, while my heart goes out to retirees watching their savings dip and federal workers losing their jobs, I have to believe that we’ll come out on the other side in a better place, chugging along with the world’s foremost economy.
As for the portfolios, we are looking to buy. It’s most likely too soon, as we still have Europe and China to negotiate with. But there will be opportunities to be had. While the reason for the volatility is different each time, my time in the market over the decades has taught me to focus on the stock market’s wealth-generating ability over time and not get stuck in the weeds of whatever crisis occurs each year.
In the meantime, I’m happy to talk with anyone who wants to know how we at Financial Family Partners are specifically approaching this volatility. Reach out to us today, and let’s have that conversation.
This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. It’s important to note that market performance can fluctuate due to various factors, including economic conditions, geopolitical events, and investor sentiment. While historical data provides insight into long-term trends, past performance does not guarantee future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
Article by David Smyth, Senior Partner and Wealth Advisor at Family Financial Partners — a financial services firm in Lexington, Kentucky.