Welcome to our March 2025 Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
Intra-Year Declines
From peak to trough, a -10% decline is considered a market correction. Charles Schwab created this timely table showing the data for the S&P 500, the Nasdaq, and the small cap index Russell 2000. Each of the three ticked into textbook correction territory within the last week.
In the moment, it’s hard to stomach the fall. But remember, this happens almost every year. The average intra-year decline in the S&P going back to 1980 is 14%! Look at 2023 – a 24% year-end return while experiencing a -10% pullback. There’s certainly still a lot to consider this year with all that’s already happened, but corrections are normal.
A Contrarian Indicator
As seen above, the US stock market has been sliding. Paired with mounting political and economic uncertainty, it’s not surprising to see the consumer confidence data sliding with it. The chart provides some interesting data points showing the subsequent 12-month S&P 500 returns. On average, the 12-month performance following consumer sentiment troughs, or bottoms, is much higher than market confidence peaks. Some investors consider this a contrarian indicator because higher stock market confidence is usually linked to a worse performance compared to lower confidence. And this does make sense since consumer sentiment tends to be lower during market downturns and times of volatility. Buy low, sell high.
International Stocks Continue Early Success
International equity markets continue to be a surprise bright spot early in 2025. Valuations leading into the year were near all-time lows along with any confidence (see above). As investors have begun rotating out of growth stocks and towards value, the ultra-value stocks of international developed and emerging markets – compared to the US – have greatly benefited. The developed international market index is off to its best start since 2000 through the first week of March, and emerging markets aren’t far behind. Diversification remains important!
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