Navigating Market Volatility: Why Staying the Course is Key

By Dennis Byrne

Financial Advisor, RJFS

As we usher in a new administration, many clients are understandably concerned about the potential volatility and policy changes that could impact their portfolios. It's natural to feel uneasy during times of uncertainty, but it's crucial to remember that market fluctuations are a normal part of investing. Here’s why staying the course with a well-diversified portfolio is often the best strategy.

The Current Market Landscape

Coming into the year, the stock market was notably expensive. Historically, corrections—defined as a drop of 10% or more from recent highs—are a healthy and expected part of market cycles. On average, we experience a correction once a year, yet we haven't seen one since October 2023. This absence of corrections can create a sense of complacency, but it's important to recognize that they are a natural and necessary part of market dynamics.

The Role of News and Technology

In today's world, 24/7 news cycles and advanced Wall Street technology can lead to rapid and severe market drawdowns. The speed at which information spreads and trades are executed makes trends harder to predict. This environment can amplify market reactions to news, creating more volatility.

Shifting Focus: From the Fed to the Administration

For the past five years, the Federal Reserve has been the primary focus of market attention. However, with the new administration, the spotlight has shifted to policies on trade, immigration, and federal government downsizing. These policy changes can act as catalysts for market movements, adding another layer of complexity to the investment landscape.

The Importance of a Long-Term Focus

Despite the potential for increased volatility, it's essential to maintain a long-term perspective. A diversified portfolio that includes various types of stocks and bonds can help manage risk and provide downside protection. At Hendel Wealth Management, we take diversification a step further by incorporating hedged equity and structured notes, offering an additional layer of protection against market downturns.

Economic Outlook

While the new policies may lead to a slowdown in economic growth, we do not foresee a recession on the horizon. It's important to stay informed and be prepared for potential market fluctuations, but making drastic changes to your portfolio based on short-term events can often do more harm than good.

Conclusion

In times of uncertainty, it's natural to question your investment strategy. However, history has shown that staying the course with a well-diversified portfolio is often the best approach. By focusing on long-term goals and maintaining a disciplined investment strategy, you can navigate market volatility with confidence.

If you have any concerns or would like to discuss your portfolio in more detail, please don't hesitate to reach out to us at Hendel Wealth Management. We're here to help you stay on track and achieve your financial goals.

Any opinions are those of Dennis Byrne and not necessarily those of Raymond James. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results. This content was created with the assistance of artificial intelligence (AI). While efforts have been made to ensure the quality and reliability of the content, it is important to note that AI-generated content may not always reflect the most current developments or nuanced human perspectives.