April 1, 2025

Clients often ask us about why rebalancing is important, selling a portion of securities that have performed well and buying an asset class that is underweighted in the overall allocation has proven itself in every sharp correction. The S&P 500 index experienced a steady slide from its peak of 6,163 on February 19th, closing in correction territory down 10.3%, on March 13th. The more volatile NASDAQ 100 slid 13.5% during the same period. A subsequent bounce left both indexes trading in territory they originally reached six to nine months ago. After starting the year up about 4%, 2025’s market is now negative. Six of the seven “Magnificent 7” showed declines in a range of 19%-23% from their highs. Tesla showed a 50% decline, returning the stock to its pre-election range.

Corrections are historically common and occur about once every two years, bear market drawdowns of 20% or more occur only half as frequently. Treating every correction as a budding bear market is equally likely to be right or wrong. If you have been an investor for any significant length of time, you have been here before. Looking ahead, while market volatility may persist in the short term, maintaining a disciplined investment strategy and focusing on long-term goals remains key. If you’re unsure about your current allocation, we recommend reviewing your portfolio to ensure it aligns with your risk tolerance and objectives.

The Consumer Price Index indicated slower inflation, which could be an indication of economic weakness. The Federal Reserve generally answers these indicators with lower interest rates leading to cheaper money to stave off any recession fears.

Year to date, the three indices are negative with the Dow and S&P 500 at -1.27%, -4.59% respectively. The technology laden NASDAQ is negative at -10.42%. The current yield on the 10-year Treasury note is currently 4.27%, while the yield on the two-year Treasury is at 3.89%.

Tax season is upon us so keep an eye out for final tax documents to arrive shortly.