Volatility Will Be Everpresent for Now...
March 1, 2025
The markets had a bad week, putting a cap on a difficult month. That the averages turned down shouldn’t have come as a surprise following two years of 20+% gains and a further rise at the start of the year. It was a set up for at least a bit of a reversal. With consistent equity gains over a prolonged period of time, it is easy for investors to become complacent. Then when suddenly the momentum ‘music’ stops, investors realize it might be prudent to take a more realistic look at valuations, selling begins and builds upon itself. Exaggerated valuations of popular investments (‘momentum’ and meme stocks, crypto tokens) take a big hit. Nothing unusual about this.
Recently, I was on a small water taxi boat. One of the passengers was not happy about the up and down movement of the boat, felt like she might get sick. She was told to just focus on the horizon, not on the boat movement. This is good advice for equity investors as well. You have to expect, and be willing to tolerate, more volatility, an occasional dramatic decline in prices and the value, losses in your portfolio. The ups and downs as it were. Focus on the long term, be mindful of what you own and don’t get flustered or panicked and make impulsive, likely foolish, trades.
Right now, of course, there is the added complication of greatly enhanced uncertainty coming from the federal government. The Trump administration is taking bold steps with new policies, the impacts of which are yet to be completely felt. Unintended consequences will also surely follow. As an example, the dramatic, almost complete, elimination of foreign aid coming through the auspices of the US Agency for International Development has impacted many… including Midwest farmers whose wheat was purchased for distribution overseas. Is that ‘bad’ foreign aid? This is a real item, unlike the purchases, quoted at varying dollar amounts, of condoms for Gaza… a total fabrication as it turns out. It is impossible at this point to know what the impact of tariffs will be on the economy and inflation or the impact of deporting thousands of hard-working yet undocumented workers. The markets do not like all the uncertainty; volatility will persist for some time to come.
I cannot leave you today without saying something about yesterday’s dramatic scenes in the White House. Donald Trump got the most votes in the last election though he did not even get 50% of all the votes cast. Yet he seems to feel that he has been given a mandate to completely revise the country’s position in the world order. I am not going to debate all the policy initiatives and will suggest that for much of it, the MAGA forces and your humble scribe will have to agree to disagree. That said, for the life of me I cannot understand, much less abide, the cozying up to Vladimir Putin and his Russian criminal empire. Russia has the 11th largest GDP – Italy, France, even Brazil are larger. What is so important about a country that lives on commodity exports and criminal activity?
Russia invaded Ukraine yet our new Secretary of Defense refuses to say so. We voted with the Russians in the UN against a resolution condemning their aggression. Trump has said he and Putin have a good understanding, even kinship. Our new intelligence chief also has nice things to say about Putin and Russia and apparently little concern that our country is just a pawn in Putin’s game. And now, surely much to Putin’s delight, we are in the process of fracturing our longstanding alliance with Europe. Even many Republican Senators are consistently reported as being upset with these turns of events, yet none will take on Trump with his vengeful machine and his deep pocketed supporters. What exactly is it that the US will gain from all this…or are there short-term gains to the benefit of certain individuals while the country will be left to deal with long term negative consequences? Is this really what Trump’s ‘Yes, but’ (Yes, he is a terrible human being but…) supporters expected? I hardly think so.
OK, a little salve for all these wounds. Ed Yong is a thoughtful scientist, a Pulitzer Prize winning writer, and someone I have read myself. The link is to an interview with him. It is a calm deliberation, and a thoughtful one, on many aspects of our existence.
I hope everyone has a lovely weekend. Yesterday, I was out at my house on Long Island and saw many green shoots poking out of the ground...daffodils on the rise. Spring soon enough. Hope springs eternal and spring makes me hopeful. I hope it does the same for you.