The first quarter of 2025 has reversed some of the fortunes we experienced in the stock market over the past couple of years, so let’s take a closer look at what’s happening. Market volatility is fairly normal, with 10% corrections occurring on average every other year. So why does this feel different to many investors? The main reason is recency bias. As we kept seeing the market hit new all-time highs, we tended to forget that it is not always like this—even the "Lost Decade" from 2000 to 2009 seems like a distant memory. Adding in inflation issues, a new regime in the White House, higher interest rates, and markets that are historically overvalued by many metrics, the reality is that we should expect some volatility.
When markets spike or drop sharply, the instinctive reaction may be to make a quick exit or entrance. But attempting to time the market, even for the most experienced investor, is nearly impossible. Instead, consider these steps to help you stay calm and focused:
- Have a Plan – It’s crucial to stay focused on your long-term plan: one built around your goals, budget, time horizon, and risk tolerance. If you do not have a plan, market volatility will feel much more painful. Working with a financial professional that can assist in creating a well thought out plan can help eliminate many of the concerns you may have.
- Take a Deep Breath – Market turbulence is part of the investing journey. Stay calm, take a deep breath, and avoid making decisions driven by short-term emotions.
- Turn It Off – The endless flow of financial news and differing opinions can be overwhelming. Sometimes, the best move is to step away from the noise and avoid reacting impulsively.
- Look at the Big Picture – Step back and maintain a long-term perspective. Market movements are natural and should be anticipated, not feared.
Is the correction for 2025 over? Or is more pain ahead for the markets and your portfolio this year? Either way, this is all part of the investing lifecycle. At Legacy Finance we can help you create a solid strategy knowing market fluctuations are expected events—not reasons for panic.