2025 Quarter 1 State of the Market

Recently, during a Lunch and Learn for our clients, New Millennium Group was asked if we thought there would be a correction in the market within the next 90 days. At the time, the S&P 500 had just closed at 5, 983.25 (February 24, 2025). Furthermore, the NASDAQ, S&P 500 and DOW industrials were coming off December 2024, January 2025 or February 2025 all-time highs. Our response to the question was that in our opinion we would see a correction within the next three months. Given the fact that S&P 500, NASDAQ and DOW industrials have all retreated 9.16%, 14.13% and 7.62% respectively from recent all-time highs, I think it is safe to say that for the overall market we are in correction territory.

All investors must remember market volatility, including corrections, is not an extraordinary phenomenon. This market volatility happens frequently over time. Even last year, when “it was a banner year for U.S. stocks…the S&P 500 was up more than 23% in 2024, bested by both the Nasdaq (up nearly 29%) and the Nasdaq 100 (up nearly 25%).” (1) Both the S&P 500 and the Nasdaq experienced significant market downturns during the 2024 calendar year. For example, on July 16, 2024, the S&P 500 closed at 5,667.20, just over two weeks later, August 05, 2024, the S&P 500 closed at 5,186.33, an 8.49% slide in the index. Similarly, the Nasdaq experienced a decline of 13.12% because of a drop in value between July 10, 2024, and August 5, 2024. The point is that market volatility is a part of the investment landscape.

So, what does this history tell us about navigating volatile markets?  Mainly, they’re worth navigating.

After a couple stressful months in the first half of 2020, the markets recovered—just as they did after a 79% decline in the early 1930s. And that’s the point: Market crashes always feel scary when they happen, but there’s no way to know in the moment if you’re encountering a minor correction or looking down the barrel of the next Great Depression.

Still, even if you are looking down the barrel of the next Great Depression, history shows us that the market eventually recovers.

But since the path to recovery is so uncertain, the best way to be prepared is by owning a well-diversified portfolio that fits your time horizon and risk tolerance. Investors who stay invested in the market in the long run will reap rewards that make the turmoil worthwhile.”(2)

I strongly support Morningstar’s adage that if you have a well-diversified portfolio that matches your individual time horizon and risk tolerance you will reap the rewards of staying invested in the long run.  “For now, economists have largely argued that the economy is only slowing from its above-growth trend of the past few years but not headed for recession. A key part of this narrative has been a labor market that is cooling but not collapsing.” (3)

As stated in the most recent Federal Reserve statement on March 19, 2025 “Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.” (4)  Additionally, during his comments Federal Reserve President Powell commented that he still is forecasting two additional rate cuts in 2025.

Ultimately, given that market volatility is a part of investing, we will be better off financially if we stay the course that has been set for us.

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