Equity Market Note: Comments on Recent Volatility

March 12, 2025

RECENT EQUITY MARKET PERFORMANCE

  • Equity markets came into 2025 after posting back-to-back strong years of gains with the S&P 500 returning +26.29% in 2023 and +25.02% in 2024.
  • Recent bouts of volatility have resulted in the S&P 500 and other equity market indices pulling back thus far in 2025, with the S&P 500 returning just under -4.5% year-to-date as of this writing. Much of the volatility is stemming from the new administration’s trade policies, with concerns over the economic outlook due to the protectionist narrative taking place.

 

EQUITY MARKET VOLATILITY IS NORMAL

  • While volatility in equity markets can be uncomfortable, it is typical. Back-to-back years of +20% returns as measured by the S&P 500 Index can make years such as 2022 (-18% pullback in the Index) seem like a very long time ago.
  • Looking back through history, equities, on average, have experienced corrections of 5% or more three times per year, 10% or more once per year, and 15% or more every 3 years. Having the right allocation in place to withstand these market corrections based on an investor’s personal situation is something that we focus on at Centerpoint.

 

STAYING THE COURSE IS PARAMOUNT

  • As you’ve heard before from our team, staying the course through periods of volatility is extremely important. Historically, markets have rebounded from pullbacks. Timing the rebound or ‘getting out to get back in’ is not a strategy that we recommend. Timing the re-entry point can be just as difficult (if not more difficult) than the timing of the sale – even missing a few of the best days in the market can significantly impact an investor’s returns over time.

Staying fully invested proves most prudent

 

  • Noted in this chart is an investor’s returns over the thirty year period between 1995-2024. As illustrated, even missing only the 10 best days over that period reduces an investors return by more than half. This data provides the insight into why we do not believe trying to ‘Time the Market’ is a viable strategy. Markets have recovered from sell-offs throughout history, with different instances resulting in different recovery periods:
    • Global Financial Crisis – Due to the severity of the market decline, it took the S&P 500 Index almost 6 years for a full recovery
    • Brexit Sell-Off – The market initially corrected by pulling back but its impact was short-lived; markets recovered within 10 trading-days
    • 2020 Covid Pandemic – Markets more than recovered by the end of the same year
  • The takeaway is that recovery periods can be variable depending on the specifics to a decline, but markets have It is not worth trying to time the recovery as missing some of the best days can result in dramatically different results than remaining invested.

 

REMINDER FOR INVESTORS

  • Please reach out to discuss your portfolio should you have any questions or if there have been any material changes that would impact your financial plan. We construct portfolios and allocations in coordination with an investor’s financial plan and risk tolerance. Staying the course through periods of market volatility can be challenging, and that is what we are here for. We caution investors who think ‘This Time is Different’, as we’ve heard this throughout market history, and yet equity market returns have continued to be impressive when looked at through a long-term lens.

 

 

Disclosure: The information and analysis expressed herein is for general and educational purposes only. The information contained herein has been obtained or prepared based on sources believed to be reliable, but there can be no guarantee as to its accuracy or completeness. You should make your investment decisions based on your personal financial goals and the reward/risk level with which you feel comfortable.  Investing involves risk, including the potential for loss of principal.  Past performance does not guarantee future results. Please consult Centerpoint Advisors, LLC about your investment needs, investment objectives, risk tolerance and any changes in your life that may impact your financial objectives. This communication, along with any data or recommendation contained herein, speaks only as of the date hereof and is subject to change without notice.