Good morning. You’ve undoubtedly heard about the tariff announcement last night and the market’s swift reaction this morning. The S&P 500* is now back into correction territory which it briefly touched a few weeks ago. It’s off about 11% from its high on February 19. For those of us with diversified portfolios, we’re seeing the bond funds increase in value because of investors buying them for safety and interest rates dropping. The bond funds are cushioning the losses seen on the stock side of the portfolio.
The most common question we receive in this type of situation is: Should I do anything? Does my strategy need to change because of the current environment? Our answer which you’ve heard from us numerous times over the years is the same: no. We are not recommending any changes to our buy-hold-rebalance investment strategy.
We don’t know how long the global uncertainty with the tariffs will persist or how long-term the effects will be on the economy. But we can be assured that based on previous downturns, there has always been a recovery. If this downturn ends up being worse and longer than others, we may need to be more patient and resilient. But prudent, long-term investment principals reflect a long-term reward for this patience and diligence in sticking with our plans.
As we make our way through the coming months, a few important notes to remember:
For those in retirement or otherwise taking distributions from the portfolio, we recommend keeping 2 years of planned portfolio distributions in cash. This advice gives you the capacity to wait out this type of volatility and avoid selling stocks while the market is down.
If you have cash on hand that you’d been procrastinating on investing, this would be a relatively better time to buy than 6 weeks ago. We never know how low the market will go, but we can objectively say that stocks are more “on sale” today than in mid-February.
For our retainer clients: we continue our routine portfolio reviews. If you have accumulated cash from dividends or contributions, we invest them in the asset classes that are under their target. For many, this is resulting in purchasing US stock right now. If your portfolio gets outside of tolerance bands, we will make the necessary changes to get back to the target percentages.
For others: if your portfolio was out of balance prior to this event – in particular if it had too much risk for your goals and comfort level because of the run-up in stocks in the past few years — it may make sense to rebalance back to your target because things can always get worse. Rebalancing helps you manage the level of risk you are accepting in your portfolio.
If there were other issues in your portfolio with excessive concentrations or high costs, it’s still a good idea to develop a plan to address them. However, additional caution in executing the plan is warranted in the current market volatility.
If you’d like to discuss the specifics of your particular situation or plan, please give us a call at 817-993-0401 or reach out by email. We are monitoring the situation and are here for you.
*S&P 500 source is Yahoo Finance as of April 3, 2025 at 11:45 am central.