Stay the Course (2/20/25)
Hi Friends -
It's been a week. A loooooong ass week and it's not even over and it started with a holiday on Monday! I'm motivated to write to all of you after being unbelievably overwhelmed by nervous clients over the last week. I know my clients are not alone in their emotional reactions to markets, so I want to share with you the same sentiments I've provided in response to their late-night emails, which are as follows...
Despite what might be extraordinary efforts by some of you to avoid the news, it's impossible. The news cycle is down to about ninety seconds, and many investors are reacting to short-term headlines in pursuit of short-term profits. It can give us whiplash. And this isn't limited to politics - think about how the news of China's AI app DeepSeek initially shook the tech sector, only for the market to shrug it off. Similarly, announcements like those from the Fed or other economic data can have short-term impact on the markets. And who can forget COVID? The broad U.S. market fell more than 30% from mid-February 2020 through late March 2020.
Oh wait -- you may have forgotten how the market reacted to COVID because despite the sharp drop, 2020 ended with a 21% return (in the U.S.) That downturn wasn't just a test of patience -- it also created opportunities -- like rebalancing to buy stocks at lower prices and taking advantage of tax-loss harvesting. I'm not suggesting every down-market results in a quick rebound, but I am reminding you that volatility can work in your favor when managed strategically.
Even those of you who proudly "stayed the course" in 2020 may now roll your eyes at the phrase, seeing it as nothing more than a platitude. It's not. It's a strategy. Times like these are when "staying the course" is the hardest. My job is to keep you, my loved ones , from making emotional decisions, and that's probably the most important thing I do as an advisor.
While diversification makes sense in any environment or time period, it may be particularly important now. That said, if recent volatility has you questioning your risk tolerance, or if you'd feel more comfortable with a reasonable amount of cash on hand, there should always be flexibility in your plan. (and I'm happy to chat further about any of this....)
I was providing similar sentiment in 2020 (probably on what was twitter at the time which I refuse to ever log back into) but the takeaway is the same: Over the long run, fear and greed are far more detrimental to your portfolio and financial goals than short-term market swings.
If you made it all the way through this message - thanks for sticking with me! I welcome your feedback on this very first, very impulsively written letter. My intention is for this newsletter to cover a variety of personal finance topics, and I hope you will share with other women in your life who you feel could benefit from this form of education.
Wishing you good financial health.
