BLOG: The Roller Coaster of 2025 (so far)
The S&P 500 Index, a stock market index that tracks the performance of 500 of the largest publicly traded companies in the United States, began the year at 5,916. As I write this, it’s at 6,247. If someone were to have slept from January to now, they might wake up thinking it was simply a normal, calm market for the first six months of 2025. It certainly wasn’t.
Big Events Tested the Market
Since January, we’ve experienced the California wildfires, Ukraine war escalation, the announcement of major tariffs, the escalation of war between Iran and Israel, and the attack on Iran’s nuclear sites by the United States. Yet, the S&P 500 is now higher than it was before all these events took place. But it was anything but a straight line upward.
At one point, in early April after the announcement of the tariffs, the S&P dropped over 12% in one week. I wrote then that the best course of action was to simply stay invested, or even add to your investments if possible.
A Surprisingly Quick Rebound
I am not writing this to point out that I was correct. I didn’t expect that the markets would rebound so quickly. I am writing this to point out the mistake of trying to time the markets, or to think we can predict when the markets will rise and fall.
The past six months have given us a strong example of what can go wrong when we try to time the market. If we had reacted to the swoon that occurred in April and sold our investments, we’d have missed the resulting upswing completely. Missing out on that market rise could have had serious consequences for your long-term plans.
As I’ve mentioned before, timing the markets doesn’t work for the simple reason you need to be right twice in order to be successful. First, you need to be right that the market is at a peak and that it’s time to sell. Second, you need to be right that the market has hit its lowest point, and that it’s time to buy back in. Nobody has ever been able to consistently do both, and it’s imprudent to try.
The Takeaway
The most important takeaway from all this, for long-term investors, is that keeping with a solid plan is critical to your success. Our investment policy is founded on acceptance of the idea that the only way to be reasonably assured of meeting our long-term goals is to ride out the occasional declines in the market, even when they seem like they’ll never end.
As always, please contact me if you have any questions.
Regards,
Joe
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You can't invest directly in an index
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Investing includes risks, including fluctuating prices and loss of principal.