Learnings from a Tarriff-ic Quarter!

Commonly clients will ask us “How often should I check my portfolio?”.  This is a great question and the answer depends on a couple of factors: 1) Has anything changed that materially impacts your monthly cash flow needs or 2) Has anything changed which materially impacts your time horizon in needing funds and the amounts needed?  For example, has your retirement date changed significantly or has a new life event occurred, which might drive an investment change?

If the answer to either is yes, then we should discuss potential strategy updates accordingly; however, if the answer is no, then data shows the “Rip Van Winkle” approach works well to balance staying on a positive track, both financially and psychologically.  According to legend, Rip Van Winkle fell asleep in the mid-1700s, missing the disruption of the American revolution and eventually woke up in a better world.  Interestingly, per data from Vanguard, those who reviewed their portfolios quarterly or annually significantly outperformed those who viewed their balances daily or weekly.  This phenomenon occurs because there is a powerful temptation to react to the constant media/content noise and market gyrations (which are frequently false alarms).  To be clear, the suggestion is not to ignore your portfolio, instead, avoid the costly mistakes often caused when moving in and out of investments based on the news of the day.

Financial markets commonly dip 10%-20%+ and later recover within a short period.  There are numerous instances of this even in the last 10 years. Examples include the “Flash Crash” of 2015 where the market dipped 12% in Aug, later recovering by that November. The UK departure from the EU (known as “Brexit”) in 2016, caused a 9% pullback before recovering in just 2 weeks. Of course, we are discussing this because just 3 months ago the major indexes (including the S&P500) dropped 15%-22% between late February and early April and then fully recovered by mid-June.  At the time of this writing, the markets are shrugging off the current tariff news as it has become more comfortable that companies and economies will be able to adjust.  As you’ve likely heard us say before, what markets fear most is not bad news, it’s uncertainty.  As Shark Tank investor Mark Cuban says, sometimes the best response to markets is to do nothing, or if you want to do something then utilize a rules-based strategy to rebalance into pull backs which supports a buy low/sell high discipline. History shows that long-term investors are rewarded for not overreacting to market fluctuations, outperforming those that try to time market entries and exits.

Both the Stock and Bond markets did well in Q2

Despite selling off in April, the S&P500 was up 11% for the quarter while the aggregate bond market was up 1.2%. International stocks continue their 2025 outperformance up 19% YTD.  While small cap stocks were up 8.5% in Q2, they are still modestly off their 2021 highs, potentially offering a more attractive relative value.  All of this reinforces the merits of maintaining a properly balanced and diversified portfolio with exposure to multiple asset classes.

As always, it is a joy to partner with and serve you in your financial journey!

Regards,

Mitch Anderson                                              Destin Tompkins                           Allan Phillips