Market Update: Navigating Recent Volatility
By Frank Vance
Recently, Ed shared our high-level market outlook and expectations for the future. Given the recent market swings, I wanted to provide a quick update on where things stand today. As always, its important to stay focused on facts and reality and not get caught up in the media hysterics and arm waving.
Following the election, equity markets remained relatively stable and received a bit of a "honeymoon phase bump". Meanwhile, in the fixed income market, yields rose, and prices fell in response to the new administration's pro growth rhetoric, driving the 10 year treasury yield close to 5%.
This initial reaction was short-lived. Concerns over tariffs, trade wars, and geopolitical tensions have since pressured markets, causing the 10-year Treasury yield to retreat to around 4.2% and pushing major equity indexes into correction territory. Below is an overview of the current drawdown in different sectors and their YTD returns.
2025 Drawdowns (as of 3/11/25)
- S&P 500: -8.5%
- Nasdaq 100: -12.5%
- Mid Cap: -11%
- Small Cap: -12.5%
2025 YTD Returns
- S&P 500: -4.12%
- Nasdaq 100: -7.35%
- Mid Cap: -5.92%
- Small Cap: -9.12%
The downside is clear, but there’s good news. The typical “lower risk assets” i.e. bonds and high-quality stocks have done exactly what they’re supposed to do and are close to flat on the year.
On the fixed income side of things, the bond market (as depicted by the US Aggregate Bond index) is up nearly 2% on the year. Albeit a small sample size… Diversification is working.
Volatility Expectations
While downturns are never enjoyable, volatility is a normal part of investing—something we haven’t experienced much of in recent years. When the greed side of the “greed/fear” emotion gets out of whack, market downturns are needed and actually healthy for the long-term.
After a challenging 2022, the S&P 500 delivered strong returns of +24% in 2023 and +23% in 2024. This was with a maximum drawdown (decline) over that period of just 8% on a closing basis—an anomaly by historical standards and not realistic for extended periods of time. Historically, the S&P 500 sees a 10% decline in six out of every ten calendar years and a 20% decline roughly every five years.
These fluctuations are the natural cost of long-term investing. Through 2024, the S&P 500 has returned roughly 10% annually since inception, but that growth comes with periods of temporary decline. Without risk, there is no opportunity for meaningful returns.
Our advice... stay the course, maintain your asset allocation, and look for opportunities when everyone else is being led by emotion. If your portfolio allocation is sound, using downturns to add equity is as important as any other factor in your long-term success.
Portfolio Positioning & Outlook
We continue to maintain a balanced, neutral allocation within our investment models. In mid-2024, we proactively rebalanced portfolios—reducing equity exposure and increasing allocations to short- and intermediate-term bonds. Currently, we hold an overweight position in short-term bonds and large-cap stocks. While small-cap stocks have been hit hardest in 2025, we remain optimistic about their long-term potential and continue to hold our positioning. Should volatility yield further opportunity we will be buyers to the downside, and look for opportunities of tax loss harvesting.
As always, if you have any questions about the market or know someone who could benefit from our insights, please don’t hesitate to reach out.
Ed, Frank, & Tammy
Edward Stiles, Frank Vance
200 N Union St.
Kennett Square, PA 19348
cell 610-745-1931
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
All indices are unmanaged, do not incur fees, charges, or expenses, and investors cannot invest directly into an index. Past performance does not indicate or guarantee future results. All references to markets, equities, bonds, interest rates, or any other security is notional and for illustrative and educational purposes only. This material is for educational purposes only and is intended solely for clients of Retirement Capital Advisors only. It is NOT investment advice, a solicitation or invitation or recommendation to buy or sell any security or investment product. Please contact your own financial advisor for your specific investment situation