1Q25 Market Review
Usually, in this space, I explore what happened last quarter in the markets. However, the more recent actions from our government, and the resulting market activity, dwarf last quarters news. Thus, I am going to address the activity that has happened in April 2025. I am releasing it on the afternoon of Friday, April 11 2025. Hopefully, this blog post will age like cheap wine and be worth dumping out soon. Cheap wine though, can turn in to vinegar.
In this post, I will not comment on the actions that have caused the recent market volatility, although there is much to be said about that. Such commentary really belongs in a political, or perhaps legal, town square. Rather, I will address the results: what has happened, what may be coming, and what to do about it.
Usually, most of my thoughts are in writing. This time however, the majority of the content is in the narrated videos that I created. Beware, if you sit down to watch them all, they will take you around 20 minutes!
The recent market turmoil is unsettling, with several days of 5% drops and a single day of nearly a 10% gain. Market movements of this magnitude are rare, but not unprecedented. The market has been through other periods of significant uncertainty and recovered. Nevertheless, looking at the gyrating balance of your investment accounts can be unsettling, or even anxiety-provoking. Such feelings are normal, and real. Although it is important to acknowledge and address emotions, it is also important to be sure they do not take control of a long-term plan.
This is always difficult to foresee, but it is clear that the risk of economic recession is higher today than it has been over the last couple years. Risk is not the same thing as “gonna happen.” There is a chance of economic weakening, and there is a chance of economic strengthening. The chance of weakening has grown. While we always expect the markets to go up (just following the averages here!), it would seem rather silly to not talk about the heightened risk of economic downturns, and the impacts to the markets that we may expect. (See video review for more).
Since the media likes to give names to different market movements, or economic situations, I will give a little vocab instruction here:
- A “Correction” is the name we give to a 10% drop in the markets
- A “Bear Market” is when the market is down by 20%
- A “prolonged Bear Market” is when the market is down by 20% and stays down. No clear-cut definition.
- A “Recession” is not a market event. Rather, a recession is an economic situation. One of the key indicators of a recession is economic growth. Typically, when the US economy has negative growth for two straight quarters, it indicates recession. However, the National Bureau of Economic Research (NBER) factors in other considerations like employment and income in their determination. Since recessions rely on historical data, the pronouncement of a recession is typically not a forward-looking indicator. The last recession occurred in the Spring of 2020 as the unexpected Covid pandemic rolled across the globe.
This is always the the tougher element to finances and investing. The first thing to do is to make sure that your hatches are buttoned down. How is the emergency/resiliency fund? If you faced an unexpected and calamitous life event like a job loss, or major market drop, do you have sufficient money set aside to weather the storm?
Advisors at Trail Financial Planning suggest that people envision their lives, and their finances, by purpose and time. For short-term needs and money, we do not think the stock market is the right answer. Maybe certain areas of the bond market are appropriate, but probably not the stock market. We acknowledge that there ARE tactics and strategies people use to try and play the short-term movements in the markets. Those strategies include market timing, charting, momentum moves, bot trading, headline-based data&trading algorithms, among many others. We do not play in that sandbox. While there are many apocryphal stories of such strategies being effective (i.e. “My brother is making thousands of dollars every day in the options markets!”), they generally do not stand up in the face of a scientific scrutiny of efficiency. In our view, those strategies are more like sand castles. I love a good sand castle, but I wouldn’t want to raise my family in one!
Detailed Market Performance – a watch
Part I. What has Happened in the markets and is it normal? (4.5 minutes). This was recorded on 4-10-2025.
Part II. What might we expect next? (4 minutes).
Part III. What can be done? (6 minutes).
Part IV. Wrap it Up – Purpose! (3 minutes).
Much of the information about market performance was prepared by Dimensional Fund Advisors (DFA), one of our partners in investment management and client support. If you would like to find out more about DFA, you can visit their website directly at: https://www.dimensional.com/
Detailed Market Performance – a read
To read about the investment performance in the US and global stock and bond markets, click on the button below.
Disclosures and end notes
Information contained within is generalized information about investing and the investment markets. It should not be considered investment advice, personalized or otherwise. Past investment performance is not a guarantee of future investment performance. Investing in markets comes with an inherent risk of losing money.
