Correction Over?
The S&P 500, the Nasdaq and the Russell 2000 Small Cap Indexes all fell into “correction” territory this past week ending March 13ᵗʰ, 2025.
Friday’s strong bounce higher lessened the downward pressure.
For the week, the Dow dropped (3.14%), the S&P 500 (2.57%), the Nasdaq (2.58%) and the Russell 2000 (1.82%).
Over the pond, foreign stocks followed the leader, dropping (1.07%). Emerging stock market indexes managed a gain of .18%.
Bonds as measured by the Bloomberg US Aggregate Index were positive last week, rising .15% and are now up 2.30% for 2025.
The yield on the US 10-year Treasury ended the week at 4.32%, staying within the current range.
A bright spot last week, the Consumer Price Index (CPI) reported an increase of .2% for February, lighter than consensus.
On Monday, March 17, 2025, we will hear the latest retail sales report, followed on Tuesday, March 18, 2025, by Housing starts and building permits. On Wednesday, March 19, 2025, the markets will be parsing what Fed Chair Powell says about interest rates. It is widely expected the Fed will not make any change to rates, however as always, investors will clamor with what is said in the news conference thereafter. I listen or read what the Fed says, however this Fed is fixated on past data and has proven unreliable in providing accurate forward-looking assessments.
Asset Allocation Benefits
Asset Allocation, the process of dividing your investment assets among broad asset classes of stocks, bonds, and cash equivalents may reduce the overall volatility in rocky markets.
This was not the case in 2022, as both the stock and bond markets fell aggressively. Bonds fell because the Federal Reserve waited far too long to raise rates and needed to play catch up over a short period of time, causing whiplash on the bond market.
Current interest rates are higher than in 2022. Many individual bonds, bond mutual funds and bond exchange traded funds currently offer what I consider to be attractive yields.
If you are in your 30’s, 40’s or even your early 50’s, I suggest continuing to add to your 401K’s and IRA’s in an aggressive manner. Simply hold your nose, close your eyes, and keep dollar-cost averaging. Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets. This is no guarantee of future success, but it is a prudent way to accumulate wealth over the long term.
For those approaching retirement or currently retired, you may be experiencing the benefits of asset allocation in the first few months of 2025. It is certainly no fun watching your portfolio drop in value.
Keep in mind, your portfolio may drop in value, however, you “lose” money only when you sell a security after it has dropped in value.
Having bonds in your portfolio may provide added income and potentially less volatility.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. (28-LPL). Rebalancing, within your IRA accounts is done without incurring income tax. Keep in mind income taxes may be incurred when rebalancing non-qualified accounts.
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All data sourced from Wall Street Journal, March 14,2025 Asset allocation does not ensure a profit or protect against a loss. (34-LPL) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
