If you’re following the news headlines, you may have seen that recession fears are unsettling
financial markets. As such, we wanted to share our perspective. We hope you find this valuable,
and we are available to connect if you have any questions.
Ultimately, we believe it’s important to maintain perspective and remain balanced, especially
when it comes to your long-term financial success.
Why are recession risks rising?
Financial markets are worried about several warning signs in the economy. These include
tariffs, low consumer confidence, rising prices, job cuts for government workers, and other
concerns. With President Trump acknowledging recession fears in recent interviews, many may
wonder how to think about their investments during these uncertain times.
Further weighing on investors is potential turbulence in the near term as policy takes shape. It’s
important to stay focused on the basic principles of long-term investing in times like these.
Making portfolio changes based on emotions often proves to be costly and counterproductive.
• History of recession predictions: Recession headlines are never easy to digest. It’s
important to remember that some investors and economists have been predicting a
recession for nearly three years. Just a year ago, many believed a recession would be
imminent due to inflation. Periods of slower economic growth are a natural part of the
business cycle that can be weathered by well-constructed portfolios. In fact, markets
have performed very well since 2022 despite these concerns.
• Tariff context: The U.S. has a long history of using tariffs as policy tools, particularly to
protect key industries and national interests. Previous trade tensions often resulted in
eventual agreements. In the past, market reactions to tariff announcements were more
dramatic than their actual economic impact. In 2018, the market fell as tariffs were
implemented, but earnings growth was still strong, and GDP was almost 3% that year.
• Perspective on market declines: While the past is no guarantee of the future, the
market declines and subsequent sharp recoveries in 2020 (pandemic related) and 2022
(interest rate and inflation) are recent examples of situations where markets can quickly
change their tune. This has been the case as recessions have become shorter and less
frequent in recent decades.
Why Portfolio Balance Matters Now
During periods of market volatility, holding different asset classes proves particularly valuable.
While some market sectors face challenges, others have performed well. Bonds have provided
positive returns as interest rates declined, helping to offset stock market fluctuations in balanced
portfolios.
While the headlines may seem worrisome, the current market decline is normal by historical
standards. Similar or larger pullbacks occurred multiple times in recent years, including twice in
2024, three times in 2023, and twelve times in 2022.
While market swings can be uncomfortable, history shows that maintaining a long-term
investment approach yields the best results. Your personalized portfolio is designed to weather
various market conditions while pursuing your specific financial goals.
Remember, successful investing isn’t about reacting to daily news or market movements. It’s
about maintaining a well-constructed portfolio aligned with your long-term objectives. This is true
despite how the uncertainty regarding recessionary risk may impact the market in the coming
weeks and months.
We continue to monitor developments closely and are here to discuss any concerns you may
have.
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