The financial markets have been facing significant volatility lately, largely driven by recent policy announcements, including President Trump’s proposed tariff increases. Just this Tuesday, President Trump suggested raising tariffs on Canadian aluminum and steel from 25% to 50%, contributing to an already uncertain market environment.
While it’s easy to focus on each new headline, we like to zoom out and offer a broader, long-term perspective on the current state of the markets.
Beyond Headlines, What’s Changed?
It’s important to note that much of the recent market sell-off has been self-inflicted. Despite these short-term challenges, the underlying fundamentals of the economy remain strong.
We haven’t yet seen any substantial cracks in consumer spending or corporate profitability, which are typically key indicators of a broader economic downturn. Yes, certain stocks and sectors have fallen out of favor, and we’ve seen a shift towards defensive, value-oriented stocks, as we anticipated at the start of the year.
However, the core strength of the American consumer and corporate earnings has held up, providing some stability amid the volatility.
Looking at the Economic Forecast
That being said, headlines like the ones we’ve seen recently can certainly make it harder for both consumers and business leaders to feel confident. When there’s uncertainty around trade policies and their economic impact, it’s natural for both individuals and corporate executives to hesitate on making investments—whether short-term or long-term. This uncertainty, however, is not unusual in the context of long-term investing.
One of the most valuable tools we have during times like these is perspective. A recent research report from Dimensional Fund Advisors highlighted that, historically, the U.S. stock market has experienced significant intra-year declines.
Between 1978 and 2023, the market’s largest drop in any given year averaged around 14%. While that sounds substantial, it’s important to remember that volatility is a natural part of investing, and such declines are not infrequent.
The key takeaway from the Dimensional report is that, despite these fluctuations, the market has ended the year in positive territory 37 out of the 45 years during that period. This reinforces the importance of staying focused on long-term goals and not letting short-term volatility dictate investment decisions.
Helping You Say “We Planned For This”
At Bernardo Wealth Planning, we remain committed to long-term investing strategies, and while current market conditions may feel uncomfortable, we don’t allow them to derail our plans.
If you have any questions or would like to discuss your investment strategy further, please don’t hesitate to reach out to me or your advisor. We’re here to help you navigate through these uncertain times with a steady hand and a focus on long-term success.