Navigating Market Volatility: A Path Forward Amid Tariff Uncertainty

In recent client conversations, I've noticed increasing concern about market fluctuations. As someone who has guided investors through multiple market cycles, I understand these worries. As we journey through 2025, market volatility has indeed taken center stage. The S&P 500 has declined approximately 6% year to date as of March 13th, raising concerns among many investors.

While it may be difficult to remain calm during a substantial market decline, it is important to remember that volatility is a normal part of investing, as shown in the chart below—it shows the Russell 3000 Index from 1979 to 2024, illustrating that intra-year declines are common even in positive-return years.

Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. In USD. Data is calculated off rounded daily returns. US Market is the Russell 3000 Index. Largest Intra-Year Gain refers to the largest market increase from trough to peak during the year. Largest Intra-Year Decline refers to the largest market decrease from peak to trough during the year. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Chart provided by Dimensional Fund Advisors, L.P.

The Impact of Tariffs and Market Resilience

Recent tariff discussions with China, Mexico, and Canada have contributed to market uncertainty. However, markets are forward-looking, often pricing in expected developments before they occur. During President Trump's first term, despite contentious trade discussions, both the U.S. and China posted higher cumulative returns than the MSCI World ex USA Index.

This forward-looking nature of markets is evident in current trends—as you can see in the chart below, non-U.S. stocks have delivered positive returns thus far in 2025, helping offset the U.S. market's disappointing start. Even stocks of primary tariff targets like Canada, Mexico, and China have seen gains.

Past performance is not a guarantee of future results. Actual returns may be lower. Source: MSCI USA Index, MSCI Canada Index, MSCI China Index, MSCI Mexico Index. Index returns are net dividends. MSCI data © MSCI 2025, all rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Chart provided by Dimensional Fund Advisors, L.P.

Reminders for Investors

• Diversify Your Portfolio: Spread investments across different asset classes and geographies to manage risk.

• Stay Informed but Maintain a Long-Term Perspective: Keep up with market news, but focus on long-term growth and avoid making impulsive decisions based on short-term fluctuations.

• Rebalance Opportunistically: Market volatility often presents opportunities to rebalance your portfolio to ensure it remains aligned with your goals and risk tolerance.

The Emotional Side of Market Volatility

Market declines can be emotionally challenging, particularly for investors from cultures that emphasize financial security. It's natural to feel concerned when portfolio values decrease. However, these emotional reactions can lead to costly mistakes because missing recovery periods can significantly impact long-term returns, as illustrated in the chart below—the cost of missing even a small number of the market’s best days is significant, showing how attempting to time the market can severely impact long-term returns.

Past performance is no guarantee of future results. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio. In USD. For illustrative purposes. Best performance dates represent end of period (November 28, 2008, for best week; April 22, 2020, for best month; June 22, 2020, for best three months; and September 4, 2009, for best six months). The missed best consecutive days examples assume that the hypothetical portfolio fully divested its holdings at the end of the day before the missed best consecutive days, held cash for the missed best consecutive days, and reinvested the entire portfolio in the Russell 3000 Index at the end of the missed best consecutive days. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Chart provided by Dimensional Fund Advisors, L.P.

Conclusion

As we navigate the complexities of 2025, focus on what you can control: your investment strategy and response to market volatility. By emphasizing diversification, understanding the market's forward-looking nature, and maintaining a disciplined approach, you position yourself for long-term success.

Markets have consistently demonstrated resilience over time. By staying informed yet not swayed by short-term fluctuations, we can build wealth beyond the immediate market movements.

Have questions about your portfolio or concerns about market volatility? We are here to help. Schedule a complimentary call to discuss your specific situation and how we we can navigate these market conditions together with calm.

Investments involve risks. This material is for informational purposes only and should not be considered investment advice.