Windsor Wealth Management LLC

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Stock Market

Market Update: Good News & Some Caution Signs

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[Quick Reminder: Open enrollment is approaching! See our post 5 Financial Tasks to Tackle Before Fall for helpful tips on reviewing your benefits and more.]

There’s plenty to cover when it comes to the economy and markets.

Most of the news is good, but there are some concerns worth keeping an eye on.

So let’s break down what’s going on, including:

  • Stock Market & Corporate Earnings: Are stocks getting too expensive?
  • Jobs & Unemployment: Hiring is slowing, but unemployment remains low.
  • Consumer Spending: Why are consumers spending when they’re so pessimistic?
  • Economy & Inflation: Growth remains strong, but inflation is still a concern.
  • Risks We’re Watching: Higher energy prices and interest rates.
Image Source: ChatGPT

Stock Market

The stock market is up roughly 14% year-to-date (with dividends).

However, as the November midterm elections approach, we’ll likely see more volatility.

But consider this:

The market has delivered positive returns in the 12 months following every single midterm election since 1946.

Corporate Earnings

Corporate earnings are strong, with some sectors rising roughly 15% to 25% from a year ago. (Some analysts anticipate 30% or more growth by year-end.)

Driving this growth is the significant spending on AI and data centers, benefiting tech companies and other businesses supporting the buildout.

Interestingly, with such high earnings and a strong stock market, some investors worry stocks are becoming too expensive.

But this isn’t necessarily the case.

Keep in mind, stock prices are only part of the equation; what companies earn also matters.

Here’s a simple example:

Say a company’s stock price goes up 10%, but its earnings go up 25%.

Yes, the stock costs more, but the company is also earning significantly more.

Because earnings grew faster than the stock price, the stock can actually be less expensive relative to what the company earns.

That’s why a rising stock market doesn’t necessarily mean stocks are becoming more expensive.

Jobs & Unemployment

The unemployment rate was 4.20% in September, up slightly from 4.10% in August.

It’s still low by historical standards.

In general, if someone wants a job, they can typically find one. (See YCharts’ summary of monthly unemployment rates dating back to August 2022.)1

Also, job growth has slowed.

There were 133,000 jobs added in August, and only 29,000 in September.

Overall, employers are still hiring, but cautiously.

Consumers Are Spending, But Pessimistic

Consumer sentiment is hovering near low levels: 46.3 in October vs. 56.4 in January, according to University of Michigan survey data.2

Yet, consumer spending continues to trend upward.

This sounds contradictory, but think about your own household.

You may not like paying more for groceries or gas, but you’re likely still buying groceries, filling the tank, going out to dinner and taking the occasional trip.

Also, wages are rising slightly faster than inflation.

Overall, consumers may not feel particularly good about the economy, but their behavior tells a different story.

The Economy Is Growing

The broader economy continues to do well.

The Atlanta Fed’s GDPNow model estimates that the economy grew at a 3.6% annualized rate in the third quarter.3

GDPNow is a running estimate that’s updated as new economic reports become available, including data on consumer spending, business investment, housing, trade and the labor market. The estimates often change rapidly when new reports come out.

Inflation: The Fed Raised Rates in September

Inflation is running at about 3.8%, above the Fed’s 2% target.

To help bring inflation down, the Fed recently raised short-term interest rates by a quarter of a percentage point.

Higher interest rates make borrowing more expensive, which can slow spending and ease inflation.

The Fed’s goal isn’t to lower prices, but to slow how quickly they rise.

The challenge is bringing inflation down without slowing the economy too much.

Two Risks We’re Watching

Risk #1—Energy Prices

Energy prices are a key risk right now.

Oil has jumped to around $91 a barrel, up from $70 before the Iran conflict.

This matters since nearly everything we buy travels by truck at some point.

When diesel prices rise, transportation costs increase, and these added expenses can eventually show up in the prices we pay for everything from groceries to household essentials.

Risk #2—10-Year Treasury Yield

We’re keeping a close eye on longer-term interest rates, particularly the 10-year Treasury yield. It’s up quite a bit (currently about 5.24%) compared to 4.18% in late 2025.

Higher Treasury yields can increase borrowing costs, including mortgage and auto loan rates.

They can also make relatively safe investments (e.g., Treasury bonds) more attractive than stocks, putting downward pressure on stock prices and potentially leading to lower portfolio returns.

Finally, rising Treasury yields can cause existing bond prices to fall, potentially reducing the value of your bond holdings.

To help manage this risk, we use a strategy called bond laddering. Rather than investing in bonds that all mature at the same time, we spread their maturity dates over several years.

For example, as shorter-term bonds mature, we can reinvest the proceeds in new bonds, potentially taking advantage of higher interest rates.

Deep Dive Resource: Fidelity explains how to build a bond ladder in their article, How to earn steady income with bonds.4

As always, please reach out with any questions.

Dave

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: YCharts, US Unemployment Rate, https://ycharts.com/indicators/us_unemployment_rate

2: YCharts, US Index of Consumer Sentiment, https://ycharts.com/indicators/us_consumer_sentiment_index

3: Federal Reserve Bank of Atlanta, Current and Past GDPNow Commentaries, https://www.atlantafed.org/research-and-data/data/gdpnow/current-and-past-gdpnow-commentaries

4: Fidelity.com, How to earn steady income with bonds, https://www.fidelity.com/viewpoints/investing-ideas/bond-ladder-strategy

Investing Perspectives Regarding the Middle East Conflict

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While we don’t comment on every geopolitical event, I’m connecting with you now given the scale of recent headlines.

I first want to recognize the deep human cost of these events; our thoughts are with the families and communities personally impacted.

During times of global unrest, I believe the best way I can support you is by providing the perspective needed to navigate these headlines and their relationship to your financial goals.

Therefore, here are a few key points to keep in mind:

Perspective Over Sensationalism

We know that geopolitical uncertainty causes market fluctuations, but your portfolio is specifically constructed to help absorb these shocks.

For perspective, the market is down only about 2% from its January high.

It’s important to remember that while media sensationalism drives clicks and views, it rarely reflects the reality of your portfolio.

Historical Market Resilience

Historically, geopolitical events don’t impact the markets long term.

In fact, the chart below illustrates how common unprecedented uncertainty truly is.

Whether it was the Cuban Missile Crisis in 1962, the Arab Oil Embargo in 1973, or the 9/11 attacks in 2001, each of these events felt like a permanent turning point for the world and the markets.

However, as the blue line demonstrates, the S&P 500 has a remarkable track record of moving through these shocks.

The Recovery Timeline: What History Tells Us

While every global crisis is unique, history shows a consistent pattern in how the S&P 500 processes shock.

According to LPL Financial research, dramatic world events tend to trigger market declines that are notable, but rarely catastrophic.

Since 1941, the average market reaction looks like this:

Initial Shock: The average one-day decline is 1%.

The Bottom: Markets typically find a floor within about 18 days.

The Recovery: Pre-event levels are usually restored in under 39 days.1

[RESOURCE]: See the “math” for yourself. In this LPL Financial research report, Iran Escalation: How Markets Have Reacted to Geopolitical Events, you’ll find a breakdown of 25+ major world events and the number of days it took for the market to recover from each.

Navigating Current Risks: Energy Costs

While history is on our side, we remain focused on a key economic risk: a prolonged conflict that keeps oil prices elevated.

Since energy impacts everything from manufacturing to shipping costs, these ripples can affect the broader economy.

However, there’s a small silver lining: the U.S. economy demonstrates far more resilience to energy shocks than in decades past. In the 1970s, energy costs accounted for nearly 10% of household disposable income. Today, it’s closer to 4%.

Also, the U.S. has transitioned from a dependent importer to a net exporter of energy, meaning our economy is no longer solely at the mercy of foreign supply.

Our Strategy: Discipline Over Reaction

Beyond daily portfolio oversight, we also leverage real-time briefings from Fidelity’s senior investment strategists. This collaboration helps us strengthen your strategy and prioritize your long-term goals over short-term market noise.

While geopolitical shocks often feel urgent, history shows that asset prices generally revert to their long-term trends. In fact, the S&P 500 has historically been higher one year after a major military shock 73% of the time, with a median gain of 9.7%.2

We recognize that “waiting it out” is incredibly challenging. It’s human nature to want to take action during volatility.

However, the most effective action is often disciplined patience. Rather than making premature adjustments, we believe the best path forward is to allow the strategy we’ve built to do its work.

Moving Forward

We’re watching the data closely so you don’t have to.

What’s more, our door is always open if you have questions or want to check in on your progress.

Please reach out—we’re here to help you stay focused and on track toward your goals.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: LPL.com, Iran Escalation: How Markets Have Reacted to Geopolitical Events, https://www.lpl.com/research/blog/iran-escalation-how-markets-have-reacted-to-geopolitical-events.html

2: HartfordFunds.com, Military Conflicts May Rattle Markets, But Not for Long, https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/CCWP114.pdf

Rate Cuts, Jobs, Growth: A Look at 2026

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As we wrap up 2025, we’re closing the books on a year that delivered strong markets and a few surprises along the way.

More importantly, the trends taking shape now will help guide the decisions we make together in 2026.

Today, we discuss:

  • How the markets performed in 2025.
  • Why the Fed is likely to cut rates again.
  • Where the job market is showing quiet signs of stress.
  • What GDP growth and corporate earnings suggest for 2026.

2025 Market Review: Better Than Average

It’s been another impressive year for the stock market.

Year-to-date, we’ve seen growth of about 16.5%, following a strong 24% gain in 2024.

For perspective, the market usually averages around 8% to 10% each year, so we’re well ahead of the curve.

The one major bump we faced was a steep (but short-lived) drop in April when new tariffs were announced. This created a lot of uncertainty. Companies that rely heavily on global suppliers, like Walmart, saw their stock dip instantly.

In anticipation of the tariffs first mentioned in February, Walmart’s stock had already begun its decline from a high of $105 per share. When the tariffs were officially announced in April, the stock dropped further from $89 to a low of $82 per share, but it bounced right back. It’s currently trading strong at $115 per share, driven by people looking for better deals and the company’s leadership in online shopping and delivery.1

The good news is that many companies have adapted to the new tariffs.

For example, Walmart has successfully shifted a great deal of its product sourcing from China to India and Southeast Asia, including Vietnam and Thailand.

Ultimately, the tariffs caused uncertainty, but the market bounced back strongly.

Let’s switch gears now, and talk about three financial projections and key themes for 2026…

#1—Continued Rate Cuts

The Fed has a tough job: they must balance keeping inflation near their 2% target (now about 2.8%) while also ensuring the job market stays strong.

This balance is currently fragile.

To counteract the current risks in the economy, the Fed will likely continue to cut interest rates both in December and in early 2026. These cuts aim to lower borrowing costs, give the job market a lift and restore consumer confidence.

As long as the job market doesn’t weaken too fast, these cuts should help maintain steady economic conditions throughout 2026.

Related: We took a closer look at the delicate balancing act of rate cuts in our recent post, Today’s Economy: What’s Actually Going On?

#2—Labor Market Fragility

A key risk to the economy right now is the pressure placed on jobs, with the primary labor market weakness being concentrated in job cuts at small businesses.

This development will likely continue in 2026.

Signs of this trend were apparent in the November 2025 ADP report, with Reuters reporting an unexpected decline in private payrolls. (ADP processes payroll for 1 in 6 workers in the U.S.)2

This data suggests that while big company layoffs make headlines, the real pressure is happening quietly: small businesses are cutting jobs and offering fewer openings.

Read the full Reuters article here: US private payrolls post largest drop in more than 2-1/2 years in November.3

This pressure can create a dangerous self-fulfilling prophecy, consisting of a three-part cycle:

  1. Small businesses cut jobs due to uncertainty.
  2. People who are worried about losing their jobs start spending less money.
  3. The consequent slowdown validates the initial fear, making the prophecy self-fulfilling.

Keep in mind, small businesses are the main source of new jobs.

According to the U.S. Small Business Administration Office of Advocacy, “The U.S. contains 36.2 million small businesses, which account for almost 46% of private sector employment [share of employees]. From March 2023 to March 2024, U.S. small businesses created approximately 9 out of every 10 net new jobs.”4

If this massive engine pulls back on hiring or starts laying off, the overall job market quickly loses its critical source of new growth.

Two Other Points to Consider:

  • The low 4.4% unemployment rate doesn’t yet reflect what’s happening on the ground. Small business layoffs usually take a few months to show up in data, and the recent government shutdown added an extra delay. We’ll see some clarity when the November jobs report is released in mid-December.
  • We’ve yet to see any broad, hard data (enough to say there’s a clear trend) reflecting the real labor efficiency gains that artificial intelligence (AI) is expected to create. Up until now, the evidence we do see is largely anecdotal.

#3—Moderate Economic Growth

Most analysts’ forecasts for 2026 show U.S. economic growth ranging from 1.8% to 3.2%.

Even at the low end, a growing economy generally makes things easier because there’s more “pie” to go around for everyone.

This projected growth is supported by strong corporate earnings and by the fact that the tariffs didn’t lead to the severe economic damage many feared back in April. Remember, market sentiment also drives growth.

Finally, the housing market could provide a significant lift to the economy.

If the Fed continues to cut rates in 2026, it should cause interest rates and mortgage rates to keep coming down—possibly falling into the 5% range (optimistic but plausible). This could encourage more people to buy homes.

When the housing market picks up, it creates a ripple effect across the entire economy: demand increases for repairs, furniture, appliances and other home improvement projects, which in turn boosts thousands of businesses.

Lastly, on the investment side, several major banks are forecasting a 10% to 12% return for the stock market next year. As always, these are just estimates, but they reflect a generally healthy outlook for corporate earnings and valuations as we head into 2026.

Sincerely,

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: Nasdaq.com, Walmart Inc. Common Stock (WMT), nasdaq.com/market-activity/stocks/wmt/historical

2: adp.com

3: Reuters, US private payrolls post largest drop in more than 2-1/2 years in November, reuters.com/business/us-private-payrolls-unexpectedly-decrease-november-adp-says-2025-12-03

4: U.S. Small Business Administration Office of Advocacy, New Advocacy Report Shows the Number of Small Businesses in the U.S. Exceeds 36 million, advocacy.sba.gov/2025/06/30/new-advocacy-report-shows-the-number-of-small-businesses-in-the-u-s-exceeds-36-million

September 2025 Market Update & Key Trends

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It’s been an interesting year in the markets, and with just a few months left in 2025, now’s a good time to pause and take stock of where things stand.

In today’s update, we cover key market trends:

Year-to-Date Performance: Markets are up about 11%, led by tech and industrials.

Corporate Earnings: Strong results are driving markets to new all-time highs.

Inflation & Jobs: Inflation rose slightly last month and jobs have slowed.

AI Spending: Tech giants are in a race for market share.

Interest Rates: A future Fed rate cut looks likely.

Global Markets: International stocks are outpacing the U.S.

Your Portfolio: We’ll discuss why rebalancing remains critical.

A Strong Year for the Market

Year-to-date, the market is up about 11%—a solid number for just over eight months.

Much of the strength comes from a few sectors, including technology (Microsoft, Nvidia) and communication services (Google, Netflix). Also, industrials are performing well, up around 15% (Raytheon, Boeing, Caterpillar).

However, healthcare has barely moved, gaining about 1%. It’s hampered by political and regulatory uncertainty. Specifically, concerns are over potential changes to drug pricing and Medicare policies.

Other market activity included a brief hiccup back in April due to tariffs, when uncertainty pulled the market lower. However, markets have recovered and are now hitting new all-time highs.

Remember, tariffs only effect about 15% of U.S. GDP. We discussed the “real” impact of tariffs earlier this year in our post: The Economy, Tariffs & Consumer Sentiment. Suffice it to say, the media often leaves out vital information.

Earnings Drive the Story

At the end of the day, daily headlines create noise, but company earnings give us the real signal.

Overall, corporate profits are strong. In fact, much stronger than analysts expected coming into the year. Early-year forecasts predicted about 5% growth, but companies are on track for closer to 10%.

This strength has helped push markets higher despite ongoing worries about jobs and tariffs.

In fact, Morgan Stanley’s top equity analyst details three reasons for continued market growth in the coming months. (Note: the article allows one free view before a paywall.)1

Inflation & Jobs

Inflation is at 2.9% (up from 2.7% in July). The Fed’s long-term target is 2%. The rise is primarily being driven by increases in housing, food and energy costs. For a deep dive, read the August Consumer Price Index report.2

The job market has continued to soften. Government jobs are shrinking (includes early retirement packages), and many companies are trimming staff while raising prices to keep profits steady.

The August jobs report showed the U.S. added just 22,000 jobs, June was revised to a –13,000 job loss, and the unemployment rate rose to 4.3% (July was 4.2%), signaling a clear slowdown in the labor market.3

This Reuters article provides some simplified charts showing monthly changes in U.S. jobs, government jobs, and job gains and losses by sector.4

A key question in the months ahead is whether slowing job growth will become a bigger drag or if the economy can grow through it.

The AI Market Share Race

AI spending continues to be a major driver of economic growth.

Big tech companies, e.g., Microsoft, Nvidia, Google, etc., are pouring hundreds of billions into AI infrastructure.

It’s expensive, but unlike the dot-com bubble of the early 2000s, these are well-established, profitable companies with the resources to sustain the investment. This is a major contrast to the dot-com era, when many companies were newly formed and had no profitability history.

Overall, it’s a market share race; specifically, a competition to become leaders in a transformative technology.

Interest Rates & Global Markets

Markets are currently pricing in a 95% chance the Fed will cut rates soon, likely by 25 basis points. Overall, we’re anticipating a 1% cut by year-end.

Lower rates will help ease pressure on mortgages, boost housing activity and support continued growth.

Finally, international stocks are up about 20% this year, outpacing U.S. markets (for a change). Our decision to increase your exposure earlier this year is helping your portfolio take advantage of this momentum.

Portfolios

Tech’s fantastic run has been great for portfolios, but it can also make the sector a little too big.

This is why we’re constantly rebalancing, taking some of those profits and reinvesting them to keep portfolios diversified.

It’s an especially smart move in non-taxable accounts, since we can do it without a tax hit. We’re always watching your portfolio’s sector weightings to help keep it balanced and strong.

Please reach out with any questions.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Sources:

1: MarketWatch, The stock market is hitting records — three reasons why top Morgan Stanley strategist sees more room to run, https://www.marketwatch.com/story/the-stock-market-is-hitting-records-three-reasons-why-top-morgan-stanley-strategist-sees-more-room-to-run-33892ee8

2: Bureau of Labor Statistics, Consumer Price Index – August 2025, https://www.bls.gov/news.release/pdf/cpi.pdf

3 & 4: Reuters.com, US unemployment rate near 4-year high as labor market hits stall speed, https://www.reuters.com/business/us-unemployment-rate-near-4-year-high-labor-market-hits-stall-speed-2025-09-05/

AI Is Booming, Diversification Matters

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For a while now, we’ve been hearing how artificial intelligence (AI) is reshaping the investment landscape.

Much of the growth has come from a small group of stocks; specifically, the Mag 7: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla.

Their recent performance has been remarkable, driving an outsized share of the S&P 500’s gains.

Here’s a look at the Mag 7’s performance since the 2025 market low in early April:

Alphabet (Google): 23.43, Amazon: 27.51, Apple: 17.54, Meta Platforms (Facebook, etc.): 37.60, Microsoft: 32.82, Nvidia: 49.49, Tesla: 46.98 — (Source: Morningstar, reported on 6/16/251)

Still, with so much riding on so few companies, market concentration is a real concern.

While AI presents exciting growth opportunities, it’s important to diversify within the AI sector itself, beyond just the largest players. This helps capture a broader range of innovation and mitigate risk.

For Example:

Diversification could include niche players and startups focused on AI in healthcare, finance, robotics and cybersecurity, or hardware manufacturers supporting data center expansion for AI workloads.

What’s more, you can diversify based on customer adoption cycles, e.g., AI in logistics or biotech may ramp up at different times than AI in social media or e-commerce.

Your Portfolio & Diversification

One of our key roles is to help ensure your portfolio isn’t overly reliant on any one company or sector. We stay diversified by spreading across industries, incorporating global opportunities and maintaining a mix of stocks, bonds and alternatives (e.g., real estate funds) to manage risk and support long-term growth.

Also, we review 20-to-30 accounts daily, adjusting holdings to maintain target asset allocations. This helps ensure your portfolio is aligned with your investment goals and market conditions.

To learn more, read our investment philosophy statement: A Disciplined, Research-Driven Approach to Investment Success.

Related: We discussed the Mag 7 earlier this year in our post: S&P 500 Shifts From Home Runs to Singles and Doubles.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Source:

1: Morningstar, These Are the Best Mag Seven Stocks to Consider for AI Investing, https://www.morningstar.co.uk/uk/news/266066/these-are-the-best-mag-seven-stocks-to-consider-for-ai-investing.aspx

Is market news scaring you? Here’s the bigger picture.

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Could the financial news headlines be more daunting?

Trade uncertainty and its economic ripple effects are behind most of these headlines. (Read our post for the “real” impact of tariffs.)

However, a crucial point often absent in media coverage is the historical link between market volatility and long-term portfolio growth.

For Example:

The below chart depicts the growth of one dollar from 1926 till 2024. The red lines highlight 20%+ market drops.

As you’ll see, time after time the market bounces back—even higher.

Your Financial Plan

We’ve built your financial plan to navigate market volatility.

Candidly, if you want long-term portfolio growth, then the price you pay is short-term volatility.

Unsurprisingly, we’ve seen this recent volatility before, i.e., during Covid. And, we bounced back from that—even higher!

Uncertainty drives volatility.

No one knows when the volatility will end. Nevertheless, we’re confidently buying valuable companies on sale.

I encourage you to stay the course and maintain your financial plan.

Reach out with any concerns or questions.

–David Bunker, Financial Advisor & Licensed Fiduciary

P.S. Thank you to everyone who requested a copy of Bill Perkins’ “Die With Zero.” I was thrilled by the response following last month’s email, How To Spend Confidently & Without Regret in Retirement, where we discussed the book. I still have a few copies available, so please let me know if you’d like one.

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

Our Response to Recent Market Volatility

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The stock market’s recent volatility can feel unsettling, but we remain confident in our strategy.

That said, it’s natural to feel rattled—or even tempted to move to cash—when markets drop, especially with the media constantly promoting this approach during market swings.

However, history shows that some of the best market days happen right after the worst ones.

As an example, see the chart below highlighting: Staying invested yields a 10.4% gain, while missing the 60 best days results in a -3.7% loss.

When Visibility Is Low, Strategy Matters More Than Ever

Background

The stock market has been volatile the past few days, down about 8.2% from a recent high in early February.

For perspective, the market dropped 8.5% between July 16 and its low on August 5, 2024, but rebounded by August 30, surpassing its July 16 level.

In general, market recoveries tend to be quick. The average time to recovery is three months from a 5%-10% downturn and eight months from a 10%-20% correction, according to Invesco research.

Let’s take a look at two key factors causing the current fluctuations:

#1—Tariffs

President Trump recently imposed new tariffs on Canada, Mexico and China, escalating trade tensions and contributing to market uncertainty. After a 30-day pause, he implemented 25% duties on Canadian and Mexican imports, along with a second round of 10% duties on Chinese goods, bringing total tariffs on China to 20%. (Then, just two days after, Trump issued some exemptions for Mexico and Canada goods. The situation is highly fluid.)

The media often frames this as a “trade war” or even an “act of war,” but we urge you not to get caught up in the rhetoric.

FACTS: Clarifying Misconceptions & Highlighting Opportunity

Tariffs existed well before income taxes in the U.S.

In fact, they were the primary source of federal revenue for much of U.S. history before the income tax was introduced in 1913.

While tariffs continue to generate revenue today, they’re a very small portion of the federal budget compared to income taxes. (To learn just how small, read our post: The Economy, Tariffs & Consumer Sentiment.)

This historical perspective can help put recent tariff activity in context, i.e., rather than viewing them as unprecedented or catastrophic, it’s helpful to remember that tariffs have long been an economic policy tool.

Tariff activity may cause short-term market fluctuations. However, it’s not inherently a signal of economic collapse—despite media hype.

Finally, past volatility—whatever the cause (e.g., inflation, pandemic, tariffs, war, etc.)—has been an opportunity to buy great companies at a discount.

#2—Broad Economic Uncertainty

There’s a general sense of economic uncertainty driven by multiple factors, including geopolitical tensions, inflation concerns, interest rate policies and the new administration’s actions.

In just the last few weeks, Trump has signed nearly 100 executive orders targeting key areas, e.g., immigration, energy, federal workforce policies, trade, etc.

This activity and uncertainty fuels market fluctuations as investors react to shifting economic conditions. Markets tend to be sensitive to uncertainty, and volatility often follows when investors struggle to predict how these factors will play out.

Our Recommendations

Keeping a long-term perspective can help ease concerns about volatility and uncertainty.

In fact, staying invested through the ups and downs is key to long-term success.

Keep in mind:

-Each day, we rebalance 20 to 30 client portfolios to help maintain diversification and manage volatility. We also ensure your portfolio has the right mix of cash and bonds to navigate market fluctuations. Every decision is tailored to your unique risk tolerance and retirement timeline.

-Market swings often present opportunities, and have historically been an opportunity to buy good companies on sale.

Maintain Your Long-Term Financial Plan (Chart)

As we mentioned earlier, it’s natural to feel the urge to move to cash when markets drop. But doing so could mean missing out on some of the best market rebounds.

Consider these market facts from the below chart covering 1/3/05-12/31/24:

  • Seven of the 10 best days occurred within two weeks of the 10 worst days.
  • Six of the seven best days happened right after the worst days.
  • The second-worst day of 2020 (March 12) was immediately followed by the second-best day of the year.

Market downturns are often followed by strong recoveries. Staying invested helps ensure you don’t miss those critical days.

Of course, no one knows the future—but history offers a clear lesson.

Reach out with any questions.

–David Bunker, Financial Advisor & Licensed Fiduciary

Before You Go

Get help optimizing your retirement income. Download our FREE “Prolonging Retirement Income” checklist.

Also, receive help retiring to the life you want, schedule a complimentary financial planning consultation.

This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.

S&P 500 Shifts From Home Runs to Singles and Doubles

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For the past few years, the Magnificent 7 have dominated market earnings growth, at one point soaring nearly 60%. (see chart)

However, this pace is unsustainable.

As expected, the Mag 7’s (Apple, Microsoft, Amazon, Nvidia, Tesla, Alphabet and Meta) earnings growth is slowing. It’s now projected around 20%, still a strong gain.

Meanwhile, the rest of the S&P 500 is growing steadily.

This is a welcome sign, since diversification helps manage risk, (i.e., instead of home runs, the market’s delivering singles and doubles—small, steady gains that add up over time).

Let’s face it, home runs are great.

But, a well-rounded team—built on singles, doubles and solid defense—wins more games.

The same goes for diversification in investing.

What’s causing the shift?

Steady economic growth is helping drive the broader earnings, including a GDP around 2.5-2.7% and low unemployment. AI also remains a key growth driver.

It’s encouraging to see more companies contributing to earnings growth.

Granted, the right side of the chart (gray shaded area) is an estimate, but if these trends hold, we’re likely looking at a more balanced market in the coming months.

PS: If you missed it, we previously shared a detailed update on the economy: The Economy, Tariffs & Consumer Sentiment.

–David Bunker, Financial Advisor & Licensed Fiduciary

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This communication was prepared with financial writer Sharron Senter’s assistance, based on interviews with David Bunker, a financial advisor and licensed fiduciary.