This may seem hard to believe, but markets actually delivered reasonable returns for the first quarter of 2025. Except for the U.S. equity market, which fell by 4.2%, Canadian equities were up 1.5%, international equities were up 6.9% and bonds were up 2.0%. As many of you are likely aware, however, the first quarter’s impacts have been completely wiped out due to the events unfolding post-quarter end.
Let’s hope that Donald Trump had lots of friends before he became re-elected, because he certainly has not made any new friends lately! Broad-sweeping announcements of tariffs to be applied to many trading partners of the United States has flustered both foes and allies alike, as well as the global investing public in general. It has been over two months since we first commented on the Trump tariff announcements, and the rhetoric from the White House and elsewhere since then has been both disappointing and extremely nonsensical.
As we outlined in our initial comments on the Trump tariffs, our job is to stay focused on the long-term well being of your assets invested with us. By reacting to current/short-term market events, you would be disregarding the long-term well being of your assets. So, as you might expect, we will be steadfastly consistent in our messaging and counselling of our clients: we do not recommend making changes in light of what is currently happening in the markets!
Here are some common arguments that have been raised recently, and in almost every other past market downturn:
This time it is different.
Justwealth response: No, this time is not different. The circumstances are different, but the eventual outcome is likely to be the exact same. Abnormally high short-term stock market fluctuations followed by a resumption to new all-time highs over time. Prior to this most recent downturn, the stock market record for recovering from sharp losses has been 100%.
This will trigger a crippling recession.
Justwealth response: No, it probably won’t. Even if there is any kind of recession, economies have historically adapted and returned to prosperity. There are many entities other than the U.S. President that can affect economic growth, challenge his authority, or even undo his actions….if they even happen!
I just want to lower my risk temporarily until things improve.
Justwealth Response: That is not a good idea. That is market timing and we cannot stress enough it will likely result in sub-optimal, potentially devastating, outcomes. Nobody can predict when things will improve or, more importantly, when markets will go up or down in the near-term future. If you believe that markets will go up in the long term, why would you stray from that?
Let’s view this from another perspective: How does this compare to the previous market panics regarding COVID in 2020 and the Great Financial Crisis of 2008/2009? The onset of a worldwide pandemic threatened to bring every single economy in the world to a grinding halt since people could not safely leave their homes (at the time of peak fear). During the Great Financial Crisis, it was feared that the global financial system would fail, and triggered government bailouts, life-support corporate mergers and bankruptcies of major global financial powerhouses like Lehman Brothers. The tariff trauma is a minor inconvenience, predominantly for U.S. consumers, affecting the exports of some goods, for a limited number of countries. The potential for economic devastation due to tariffs is not even remotely close to the magnitude of severity of the other two referenced “crises”.
The negative impact of COVID on stock markets was about -33% at the trough, and for the global financial crisis it was closer to 50% (and both times markets recovered fully in reasonably short order). At the time of this writing, the S&P 500 is down about 15% from its previous high. Putting things in proper perspective, the market decline due to the fear of tariffs has probably already overshot its appropriate impact, but markets can be irrational in both directions. And let’s keep in mind, this is a man-made crisis with a controllable outcome dependent on one person! We fully expect that “deals” will be announced, and this nonsense could end in a hurry.
Despite all of our assurances, we have, true to our word, completed our regular annual review of all of our portfolios, our capital market assumptions, and carefully considered where changes may make sense for the long term. Over the past two months, we have made subtle changes to 5 of our roughly 80 different portfolios: Capital Preservation, Global Conservative Growth, Global Moderate Growth, Low Volatility Equity and Global Maximum Growth. Summarizing, we made changes to the conservative and aggressive ends of the risk spectrum, the mid-level risk categories were left unchanged. Thematically, we attempted to increase diversification and prepare for lower future interest rates on the conservative side, and lowered our risk modestly for the more aggressive portfolio changes.
We fully acknowledge that volatile markets can be unsettling, and it is a natural tendency to want to take action with the belief that you can control outcomes. The reality, however, is that outcomes cannot be controlled or predicted by anyone in the short term. All portfolio choices made between Justwealth clients and their Personal Portfolio Managers are made based on a long-term outlook (unless of course you have a short-term objective). Don’t let short-term events distract you from your best strategy – volatility was factored in when the original portfolio decision was made!
Here is a recap of market performance as of March 31, 2025*
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