With markets reacting sharply to recent developments, especially around newly announced tariffs, it’s understandable that many investors are feeling unsettled. The headlines, commentary, and sudden swings can all feel overwhelming. But while the emotions are real, they don’t have to dictate our financial decisions.

Navigating market declines is never easy, especially when the headlines feel uniquely alarming. But while the circumstances may differ each time, history reminds us of a key truth: market downturns are a normal and expected part of long-term investing. We’ve seen periods like this before, and from the market’s perspective, this is part of the natural cycle.

Market Volatility Is Frequent And Temporary

Since 1954, the S&P 500 has experienced a:

• 5% decline roughly twice a year
• 10% decline every 18 months
• 15% decline about every three years
• 20% decline around every six years

These downturns, while uncomfortable, have all been followed by recoveries, and in many cases, new market highs. The market cannot go up indefinitely without interruption. Periodic pullbacks are not just normal, they’re necessary for long-term, sustainable growth.

Why Staying Invested Matters More Than Timing the Market

It’s tempting to try to avoid losses by jumping in and out of the market, especially when the news cycle feels chaotic. But timing the market consistently is impossible. You have to get two decisions right: when to get out and when to get back in. Most investors don’t.

In fact, some of the worst days in the market have been followed closely by the best days. Missing just a handful of the market’s top-performing days can significantly reduce your returns and delay your recovery.

From 1929 through 2024, every market decline of 15% or more was followed by a recovery. On average, the S&P 500 returned 52% in the first year following those drops.

Emotional Reactions Are Normal But Risky

Behavioral economics shows we feel the pain of losses more intensely than the satisfaction of gains. In volatile markets, this can lead to decisions based on fear, like selling at a low or abandoning a long-term plan.

Before taking action, it’s worth asking “Has something fundamentally changed about this investment, or is this simply short-term fear driving prices down?” Often, good investments get caught in broad market selloffs, not because the underlying business or asset has deteriorated, but because investors are reacting emotionally.

It’s important to recognize emotional triggers like:

• Loss aversion: The fear of losing money
• Anchoring: Fixating on previous portfolio highs
• Confirmation bias: Seeking out news that reinforces a negative (or positive) view

These are all very human responses. But history suggests that rational, disciplined investing wins out over time.

Keep the Right Perspective

Let’s be clear, the economy is not crashing. Even though the headlines may suggest otherwise, that’s not the reality. As of now, U.S. equity markets have pulled back more than 10% from their recent February 2025 highs, which places us in market correction territory, not a ecnomic crash.

This recent drop is driven by investor fear and uncertainty, particularly related to policy headlines and trade tensions. The fundamentals of the economy, while slowing in some areas, do not point to an imminent financial collapse. Market corrections, while unpleasant, are part of the natural market cycle.

What Should I Be Doing Now to Protect My Portfolio?

It’s one of the most common questions we’re hearing from clients right now: Should I make changes to my portfolio?

While it might feel like a smart move to “get out of the way” of further losses, history shows that making portfolio changes in the middle of a decline is often the worst time to do so. Markets recover, but those who jump out rarely re-enter at the right time.

Here’s what we are doing instead:

• We made proactive adjustments to portfolios at the end of last year and earlier this year. These were based on long-term, strategic views, not reactions to headlines.
• We reduced exposure to some of the high-flying stocks that had led the market the past couple of years (and are now leading on the way down).
• We emphasized quality companies with strong balance sheets, sustainable earnings, and better downside protection.
• We added more diversification to our bond holdings, which continue to offer attractive yields and stability.
• We remain committed to diversified portfolios across asset classes, which are continuing to demonstrate resilience.

This isn’t the time to abandon sound investments because of short-term setbacks. Some of the areas seeing the sharpest declines are the same ones that have delivered the strongest performance over the past several years. What we’re witnessing is a pullback from elevated levels, not a sign that these investments are fundamentally broken.

If something significant has changed in your personal financial life, like a job loss, family change, or retirement, those are legitimate reasons to revisit your strategy. But reacting purely to short-term market moves? That’s market timing, and history tells us it doesn’t work out well for most investors.

Don’t Assume These Tariffs Are Forever

It’s important to remember that the newly announced tariffs are not permanent. These tariffs have all been created by executive order, not new legislation or an act of congress. President Trump has positioned these as part of a negotiation strategy, not a fixed long-term policy. We’ve seen him change course many times before, and there’s already significant global pressure pushing back against the tariffs.

It’s simply too early to draw conclusions about the long-term economic impact. Making major portfolio shifts now based on speculation about trade policy is unlikely to be productive.

Principles to Stay on Track

Here are several timeless strategies that have helped investors navigate previous downturns:

• Stick to your plan: Your investment strategy should reflect your personal goals, risk tolerance, and time horizon—not short-term market headlines.
• Diversify: Spreading assets across a variety of sectors, geographies, and asset classes can reduce overall portfolio volatility.
• Use fixed income as a buffer: Bonds have historically provided stability during equity drawdowns.
• Keep investing through volatility: If you’re in a position to keep adding to your portfolio, lower prices mean better long-term value.
• Stay focused on the long term: Over every 10-year rolling period from 1939 to 2024, the S&P 500 averaged an annual return of more than 10%, despite recessions, wars, and even pandemics.

Final Thoughts

No one enjoys watching their portfolio value decline, and it’s entirely normal to feel discomfort when markets fall. But if you’ve been investing in a diversified portfolio for any period of time, you are likely still far ahead. These moments remind us that investing comes with volatility, but also with long-term opportunity.

As always, we’re here to answer your questions, review your plan, and provide clarity in times of uncertainty. Staying the course doesn’t mean doing nothing, it means continuing to act with intention, informed by market data, strategy, and perspective.