March Market Recap
Stocks took a swift dive to multi-month lows amid continued tariff threats that led to confusion, uncertainty, and lower consumer confidence. Nasdaq entered correction territory, posting its worst quarter since Q4 2022. The S&P and small-cap stocks were also negative for the quarter. On the other hand, international and emerging markets equities fared well, posting a solid quarter. Despite geopolitical turmoil, overseas markets offer attractive valuations.
Continued uncertainty is driving the market’s volatility. Stock markets priced in a goldilocks scenario going into 2025, so anything short of perfection would likely rattle investor confidence. Indeed, the introduction of tariffs was the excuse the market needed to pause the rally. This has wider implications for economies both at home and abroad because of hard-to-predict ripple effects. Where there is uncertainty, businesses hold off on capital expenditure, hiring and expansion. Higher unemployment rates mean reduced consumption, which will inevitably lead to lower corporate earnings. If this becomes severe enough, the risk of a recession will increase.
What Can Drive Stocks Higher?
Here are three ways the market can find its footing and march higher again.
First, better estimates of the impact of tariffs or the unwinding of tariffs would provide stability by eliminating guesswork – helping businesses plan with confidence.
Second, if Congress extends the 2017 Tax Cuts and Jobs Act, this will provide a shot in the arm. Talks have begun on Capitol Hill and the GOP understand what is at stake.
A third, lesser factor is the current administration’s focus on reducing regulatory red tape. This is welcomed by businesses and could further boost profitability. For example, the President’s executive order “Unleashing American Energy” aims at simplifying and expediting the permitting of energy infrastructure.
A Walk Down Memory Lane
On March 9, 2009, all three major US indexes “hit the bottom” – down more than 50% from their late 2007 highs. For those who remember the Global Financial Crisis (GFC), the down days in the market seemed like an eternity. The GFC is considered the worst financial crisis post World War II.
Fast forward to end of March 2025, sixteen years later - $10,000 invested in the three major benchmarks would be worth anywhere from $64,150 to $136,360! On the other hand, investors who stayed in cash and bonds would see their investments grow to just $15,660.
What lessons for tough times can we draw from the GFC?
- Hang in there! Well-run businesses will emerge stronger, and diligent investors will be rewarded.
- Focus on the goal line. Investing is a long game, much like running a marathon or planting a forest.
- Tune out the noise. No one can consistently and accurately foresee the future. Time in the market is much more important than timing the market.
- Be greedy when others are fearful. Heed the advice of legendary investor Warren Buffett.
- Control what you can. The market is a giant voting machine, reflecting the sentiment of most investors. It does not care how one person feels. If you feel stressed out or anxious, do something that will help you relax, such as gardening, baking, exercising and spending time with friends!
- Talk it out. Tell us your concerns. We are always here to listen and offer advice.
