March 2025 Investylitics

Horizon Advisor Network Investment Committee March 10, 2025

The Horizon Advisor Network Investylitics Committee members met on the afternoon of Monday, March 10th, as the stock markets' recent downturn was accelerating towards correction territory, defined as a drop of more than 10% from its recent highs reached on February 19th. This time, a confluence of negative headlines and uncertainty around policy risk related to the new presidential administration was fanning the flames of volatility.

While declines are often jarring, it’s worth remembering that market volatility has been relatively tame. Against a backdrop of record-setting highs, the S&P 500’s largest intrayear decline in 2024 was about 8%, and the market rebounded shortly thereafter.

It is important to remember that market downturns have been somewhat regular events. Corrections—declines of 10% or more—have occurred about once every 18 months, and declines of 5% or more have occurred about twice a year, as you can see in our first chart below.

Negative sentiment has increased far beyond what would typically be commensurate with a stock market downturn of just 10%. A press release from the American Association of Individual Investors noted the following last week:

“The American Association of Individual Investors (AAII) sentiment indicator claims that 60.6% of retail investors are bearish. The percentage of bears in its survey increased sharply from 40.5% in the prior reading on February 19. The AAII retail investor survey is now the most bearish it has been since September 2022. More stunning, this is only the sixth time since 1987 that bearish sentiment has been above 60%. Furthermore, the five-week change in the index is the third largest in history.”

It is important to note that the September 2022 bearish sentiment level closely coincided with the market low reached just a few weeks later. This turned out to be a great buying opportunity for those who wanted to take advantage of the historical Wall Street wisdom of “buying low and selling high.”

After several years of being led by a very narrow group of tech and AI stocks, we are witnessing the benefits of diversification. While US socks have declined, other asset classes such as foreign stocks, dividend stocks, bonds, cash, and gold have held up relatively well during the recent downturn, as shown in the chart below. In general, this has meant that most diversified portfolios have still produced positive year-to-date returns. This has surprised many clients, given the noise on the cable news channels and online.

In times like this, it is essential to fight against emotional responses and stay focused on your financial plan, not day-to-day news headlines, which are overwhelmingly negative, in order to draw readers and clicks. The financial plan you and your advisor have crafted to help you reach your long-term financial goals and objectives, should act as your North Star and guiding light. If your goals and objectives have not changed, your portfolio likely should not change either.

We know that well-respected investors such as Warren Buffett, Howard Marks, and Sir John Templeton have used negative sentiment and market downturns as opportunities to accumulate more of the investment assets they wanted while prices were on sale.

Famed investor Howard Marks, Chairman of Oaktree Capital Management, recently noted the following:

“The things that terrify other people will probably terrify you too, but to be successful, an investor has to be stalwart. After all, most of the time the world doesn’t end, and if you invest when everyone else thinks it will, you’re apt to get some bargains.“ – Howard Marks

We also know the past wisdom shared by Warren Buffett, “Be fearful when others are greedy and greedy when others are fearful,” and Sir John Templeton, who advised us to “Buy at the point of maximum pessimism.” This is sometimes easier said than done, which is why so few investors have experienced the kind of success they have. It is always easier to admire than to emulate the actions and intestinal fortitude of great investors.

Our final chart should help bolster your faith and confidence in the markets over long periods of time. It shows not only the average return of the markets over long periods of time but also the breakdown of positive years to negative years. We can see that since 1937, the market, as measured by the S&P 500 Index, has produced positive returns in 67 of the 88 years, or 76% of the time.

During times of volatility and downturn, we like to give you another dose of ”Financial Vitamin C”. We know that the body does not store vitamin C and needs to get it regularly to stay healthy. Likewise, administering regular doses of “Financial Vitamin C” helps us combat all the negativity in the world today and focus on our long-term financial goals and objectives.

While emotional responses are normal and to be expected, we have been here before, and we have planned for this. If you have questions about your family’s unique financial situation, please reach out to your advisor. We are here for you. And, if you have friends or loved ones that are not getting proactive communication or service from their advisor, we are also here to help them.

The views stated in this piece are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

A diversified portfolio does not assure a profit or protect against loss in a declining market

Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional.

Sincerely,

Jesse W. Hurst, CFP®, AIF®
Senior Financial Planner and CEO

*Award Recipient Jesse Hurst 

*The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors¹ list was developed by SHOOK Research and is based on in–person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology² that Forbes developed in partnership with SHOOK Research is available at www.forbes.com. 

¹ This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

² Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.