Q2 Letter to Clients

As we wrap up the first quarter of 2025, I want to briefly reflect on recent market activity and share some thoughtful insights on maintaining perspective during volatile times.

Market and Economic Overview

This quarter reminded us that markets rarely move in a straight line. The S&P 500 saw a decline of a little more than 4%, driven largely by investor unease over inflation concerns and uncertainty about global trade policies. Additionally, international markets showed surprising resilience, with the MSCI All Country World Index ex-U.S. index outperforming the S&P 500 index by nearly 11 percentage points, marking the strongest first-quarter performance for international stocks since 1987, demonstrating the importance of diversification in your portfolios.  And yet, these numbers mean nothing to me, and they shouldn’t to you either.  Index returns, especially over one quarter, say nothing about whether you are on track to achieve your own personal goals or more importantly, about whether you are living your great life right now.  You should be tracking your Return on Life index, and the stock market has nothing to do with that!  These short-term returns are just noise, distracting you from the conversation that really matters.

Strategic Opportunities Amid Volatility

While volatility can feel uncomfortable, it’s essential to recognize the opportunities it creates for a long-term investor. We continuously monitor your portfolios for opportunities like tax-loss harvesting – turning short-term declines into meaningful tax savings – and strategic rebalancing which keeps your investments on target to your risk model.  Or better yet, if you have cash on the sidelines, putting new cash to work in your investment accounts is a great way to take advantage of lower asset prices, which has an outsized effect on your future portfolio!  Volatility coming from risk is also the price we all must pay in order to expect longer-term returns that outpace inflation. 

Great New Content

In line with our belief in tuning out short-term noise and focusing on long-term goals, Dimensional Fund Advisors recently released an exceptional documentary film called, “Tune Out the Noise,” directed by Academy award-winning filmmaker, Errol Morris. I highly recommend this impactful video, which beautifully captures the essence of remaining grounded and focused amid market distractions, spoken from the perspectives of some of the smartest people in finance over the last 60 years.  Check it out in the link below.

Above all, remember that your financial plan is built specifically for times like these – grounded in your personal goals, risk tolerance, and life’s milestones. Markets will always fluctuate, but our commitment to your financial well-being remains constant.

Thank you for your continued trust. Please feel free to reach out anytime.

Election Day Reflections

I sent this letter out initially in the midst of Election Day.  There obviously was a lot of energy in the air. Anticipation runs high, and the headlines were filled with speculation on what the choices mean for the markets. But here’s the perspective we can hold: while political outcomes may feel momentous, they rarely dictate the path of long-term investments.

Here are some helpful reminders as we continue to move through this election cycle:

Election outcomes and stock market outcomes are not correlated.

Election results and market returns are often far less connected than the news might suggest. For example, research by Fidelity has shown that, over time, the S&P 500 has performed comparably under both Democratic and Republican administrations—regardless of who held Congress. Since 1976, every market sector has had periods of growth during both Democratic and Republican terms. Across election cycles since 1976, each sector has performed well at times, regardless of which party holds the White House.  The markets, it seems, march to a rhythm of their own.

Cause and effect in the markets is rarely direct.

During election seasons, it’s tempting to act on predictions about how new socioeconomic policies might influence the markets. However, even the most astute commentators cannot reliably forecast market reactions to political shifts. Financial writer for Forbes John Jennings compares this to scientists who understand why volcanoes occur but cannot predict each eruption. In markets, just as in nature, the ability to explain an event is different from the ability to foresee it.

Elections come and go; your investments have a much longer time horizon.

We may vote for a president every four years, but your portfolio is designed to endure and grow over decades. Data spanning nearly a century, illustrated by Dimensional Fund Advisors, shows that U.S. equities have consistently trended upward, no matter which party was in power. Staying the course remains the most effective path forward for reaching your long-term goals.

So as the election buzz fills the air, know that your investments are positioned for resilience. Let’s keep our sights on the horizon, with our long-term objectives leading the way.

Steady onward.