Look Forward for Opportunities, Not Back at the Carnage...
April 26, 2025
The last time we found ourselves together in this space, the subject line conveyed a simple message – ‘Too late to sell’. It was true…and good advice. Staying invested was rewarded. The market has reversed course, regaining about half the decline from its peak. And yet, investing in the markets these days remains a precarious endeavor.
In normal times, macro factors such as interest rates, inflation readings, retail sales, housing starts, etc. were fundamentally important in assessing the health of the economy and driving market action. Today seemingly all it takes to move the markets is a simple tweet or a spontaneous, off the cuff remark to reporters by President Trump as he moves through his day. Recently, I heard talk of the markets being negatively correlated to the Navarro factor – the less visible Peter Navarro is in the news and around the President, the better the markets perform. That this is even easily recognized as plausible is simply incredible. Strange times for investors.
It is old news to point out that the impact of the Trump administration’s surprising economic program coupled with its inconsistent messaging have had a pronounced effect. Here are some specifics - more than 2/3 of all the stocks in the S&P 500 were at least 20% below their recent highs before this week’s rally, many tech issues down much more. And volatility has increased markedly – so far this year, there have been 19 days when the S&P 500 average moved at least 1%... which is many times more than happened all last year.
Investors often react unproductively in response to major market declines, especially when it is coupled with increased volatility, calculating how much money has been lost, wallowing in their unhappiness, or refusing to look at their portfolios, preferring ignorance to knowledge. The former is a waste of time, the latter as remarkedly pointless as can be. The losses are history, probably temporary, move on. You should be asking yourself, and/or your advisor, what now? Advisors can use encouragement to be proactive – call yours and have a chat about what to do now. Here are a few ideas.
Harvest some of your investment losses. For example, you bought Gap shares after it became clear that the new CEO was doing a great job, the company was being recommended everywhere…and then the tariffs hit. You still believe in the company’s prospects? Great, buy some more, wait at least 30 days, then sell the shares you bought at higher prices. You have remained invested in the company in case suddenly the tariff nightmare is over and when you sell the higher priced shares, you have registered some losses that can offset gains. Remember, it ain’t what you make, it’s what you keep, and realized losses have great utility in that regard. (You have to wait 30 days after purchasing a security to sell other shares of that security that are showing losses...it is a market regulation, the Wash Sale rule, if you want to learn more.)
Make a list of companies you want to own, or that you want to add to your current position. Sometimes you miss an opportunity and are annoyed about it... if you get a second chance, which happens quite frequently, be prepared to take it. Again, chatting with your advisor can be productive in this regard, giving them more insight into how you are viewing your investments. There are many who think the markets will revisit the recent lows - anticipate the possibility. Remember the threat of widespread reciprocal tariffs has only been paused for 90 days. Isn’t it likely that there will be some more broad threats, some market depressing headlines? The recent market drop had Nvidia at $95 (now $111, 3 weeks later), JPMorgan at $211 (now $243), Crowdstrike at $325 (now $424), Microsoft at $355 (now $391) to highlight just a few opportunities that the volatility and negative sentiment produced. Be ready for the next swoon so you can take advantage of action like the above.
As has been stated here frequently, it is your money – get engaged with it, even if all that means is calling your advisor, encouraging them to think proactively. The tariff debacle is a self-inflicted wound whose secondary negative effects are only beginning to surface (tourism to the US is already suffering). In the end, however, the US economy has strength and resilience. I believe the values will recover. The trade war will be resolved and our innovative economy will remain vibrant and attractive. Think about that, not about your recent losses. Find ways to benefit.
Despite the apparent intent – and recent attempts – to reduce the tension in the ongoing ‘trade war’ with China, the issue is far from being resolved. The link below is to an article by Ben Casselman in the NY Times a couple of weeks back. It is a very insightful analysis of the decline in US manufacturing that seemingly motivated President Trump to impose draconian tariffs and why this strategy will have great difficulty in restoring the lost jobs. It is a complicated story, and one with some surprising recent developments as well. It is well written and easily consumed. You will be smarter afterwards.
Spring has finally come... our field of daffodils is giving way to tulips and flowering trees. A harsher winter makes spring seem all the lovelier and that has been my experience this year. I hope it is the same for all of you. Enjoy the weekend.