March 2025 Market Update / Why Days In The Market Matter

As it might be hard to ignore, we are sure many of you are aware that the market is experiencing a period of high volatility due to uncertainty regarding the potential effects of tariffs. The US stock market, as measured by the S&P 500, has dropped to a low of 10% from its recent high on February 25th. Uncertainty is the key factor at play, and typically when a new political administration implements trade policy changes, markets need time to evaluate and appropriately price in these new developments.

Perspective on Market Corrections

In investing terminology, a "correction" refers to a 10% drawdown in stock prices. While the current tariff concerns are a recent development, market corrections are actually quite common, with each one triggered by different factors. Since 1928, a correction has occurred on average every 13 months. (source LPL, Ned Davis Research)

We view this as a normal, healthy correction for a stock market that has delivered exceptional back-to-back annual returns (+26% in 2023 and +23% in 2024). To put this in context, as of the market close on March 11th, the stock market has provided an annual return of +16% over the past 5 years. However, during this same period, there have been 4 drawdowns of 9% or greater, including a significant 27% drawdown in 2022.

Our Key Takeaway: Time in the Market Beats Timing the Market

According to recent data from Ned Davis Research, being invested during the market's best-performing days is a critical driver of long-term performance. Interestingly, these best days typically occur during challenging market environments.

The research shows that over the last 30 years, investors who attempted to time the market and missed just the 10 best-performing days would have seen returns 54% lower than those who remained fully invested throughout the period.

The Value of Diversification

It's important to remember that not all clients are invested 100% in stocks. We build diversified portfolios with allocations between stocks and bonds based on each client's specific circumstances and goals. A moderate allocation helps reduce a portfolio's overall volatility during market downturns. For example, during this recent stock market pullback, the total US Bond Market has remained stable, actually gaining 1%.

What Works During a Declining Market?

1. Stay with our plan.

2. Maintain your existing recurring investments, whether they're with IGM, through your 401(k) plan, or both.

3. Add new money if available.

Refer to our website to review our past market letters discussing investing during a down market, here: https://www.investmentgrowthmanagement.com/resources

Disclaimer: Past performance does not guarantee future returns.