My colleagues have done an excellent and thorough job analyzing the causes behind the recent market turmoil and the underlying economic uncertainty over the past few weeks. If you haven’t seen their insightful write-ups yet, you can check them out on our website: RSWA - Blog.
I'm not sure I can add any additional insight that hasn't already been said, and I certainly can't predict what comes next. So instead, I'll stick with what’s become something of a theme for me in 2025: providing historical context for the current market environment.
Each market decline is unique, with its own set of causes, duration, depth, and breadth. However, they all share two consistent characteristics:
- During the decline, it’s difficult and often unsettling. Regardless of your risk tolerance, watching your portfolio balance fall can be painful and unnerving.
- Those who remained committed to their investment strategy—or, ideally, added to their investments—have historically been rewarded over the long term.
Pullbacks of 5–10% from previous all-time highs in the S&P 500 are quite common. They typically occur at least once, and sometimes more than once, in any given calendar year. Declines of 15% or more—like the one we just experienced—are less frequent and often coincide with fears of a looming recession. Since 1985, the S&P 500 has experienced such declines on only nine occasions (with four of them occurring in the past seven years).
As you can see from the graph, the amount of time the market spends below this level can vary significantly. In 2018, it lasted just 10 days. But after falling below the threshold in December 2000, the S&P 500 didn’t climb back to within 15% of its previous high until September 2006—only to dip below it again in January 2008. As of the writing of this, the S&P 500 is back above that 15% level after spending just four days below it.
When reviewing this history, my main question was: what do returns typically look like after the market has declined by 15%? To answer that, I calculated both the forward total return and the annualized return starting from the date the market first reached the -15% threshold, as shown in the table below.
*36.55% total return as of April 15, 2025, just short of three full years
**S&P 500 returns including dividends. Table created by Donovan Ingle, RSWA. Return Data Source: Koyfin – SPX Index & SPY ETF total return data
The variance of returns over a 12-month period is wide — ranging from +32% to -34%. However, the longer your time horizon, the more predictable the outcomes become. Every 5-year period in the historical data shows positive returns, and every full 10-year period does as well.
This is exactly why we, as financial advisors, emphasize staying the course. The timing and magnitude of market corrections are impossible to predict, but the long-term trend is not. No matter which way we slice the data, the message remains the same: stocks are in your portfolio to help grow your wealth over time — and those who stay the course are the ones who see the rewards.
Financial Planning Corner:
Go Do the Dang Thing!
In my view, money has two main purposes:
- To provide security for you and your family
- To be used for your enjoyment
In times of market uncertainty, our basic human instincts kick in and our brains shift into preservation mode. This isn’t necessarily a bad thing. After all, the main goal in retirement planning is to ensure your money lasts throughout your lifetime. But this mindset can sometimes push the second purpose—using your money for your enjoyment—even further into the background, even when it doesn’t need to be.
The financial plans we build for clients are designed with market ups and downs in mind. We expect times like these, and we plan for them. If our analysis shows that your plan is on track to support your goals and sustain your lifestyle, we are confident in that result since periods of market volatility have already been factored in.
So, if you’ve planned to spend $25,000 on travel, or gift $10,000 annually to your kids, grandkids, or a favorite charity—and the numbers show that you can support that—we strongly encourage you to do it!
If we need to course-correct later, we absolutely can. But if the opportunity to travel or live out a dream passes you by, we can’t get that time back. I’ve yet to have a client tell me they’re glad they skipped out on something meaningful because of a market downturn. But I’ve heard many reflect on things they wish they’d done.
We’ve planned for this. Take the trip. Help the grandkid. Enjoy what you’ve worked so hard to build. Our only request: bring back pictures or stories to share with us at our next meeting!
Quick Hits:
- Dyeing eggs? In this economy?? Americans are getting creative this Easter—including painting potatoes: CBC News
- Easter egg hunts aren’t just for kids. Check out these fun and festive ideas for adult-friendly Easter hunts: Good Housekeeping
- Saturday marks the 250th anniversary of the Battle of Lexington and Concord. To commemorate the anniversary, hundreds of reenactors are set to converge at Minute Men National Park: NPS.gov - Battle Road Demo NPS.gov – 250th Anniversary of the American Revolution Commemoration
129th Boston Marathon – On Monday morning, approximately 30,000 runners from across the globe will begin their trek from Hopkinton to Boylston Street. Here is my brief preview that nobody asked for:
- The professional field on both the men’s and women’s side are stacked. Among them: 2024 Boston winners Sisay Lemma and Helen Obiri, several past Boston champions, and many winners of other world marathon majors.
- On the American front, Connor Mantz likely has the best shot at contending for the win. However, Boston is famously unpredictable so nobody should be counted out. A few other Americans to watch include Clayton Young and CJ Albertson on the men’s side, and Emma Bates, Dakotah Popehn, and fan favorite and former champ Des Linden on the women’s side.
- Finally, a shoutout to all the local runners who will be racing. In particular, the Seacoast Track Club crew!
Quote: “Easter is the only time when it’s perfectly safe to put all your eggs in one basket.” — Evan Esar
Thank you for reading RSWA Financial Advisor Insights! We welcome feedback, and please forward this to a friend! Be well, take care, and stay safe!
