By the end of trading, though, most of the about-face had been regained. The gain/news/plunge/rebound cycle exemplifies how fickle the stock market can be. Similarly, zoom out to the beginning of the year and we see that U.S. stocks have fully rebounded from a near 20% decline from a prior peak that arguably came primarily as a result of tariff concerns and are now up more than 14% over the prior twelve months. Not only that, non-U.S. stocks are up 17.5% and our preferred benchmark for U.S. bonds is up 6.2% over that time frame (all total returns, including reinvestment of dividends), offering the reminders that:

• One can lean on diversification—across stocks and across asset classes—seeking to tune short-, medium and long-term outcomes to investor tolerance for investment risk
• Markets have tended to heal over time, regardless the starting point
• Better to modulate portfolio exposure to investment risk when markets are ebullient, rather than when sentiment has soured

Mostly Has Worked Out

During market drawdowns, we tend not to field too many calls from stressed out investors wanting to know when the tumult will end. Not that folks aren’t asking questions when stocks drop that we’re happy to answer regardless the reason. But we tend to think that the lack of broader client concern during market declines stems from the fact that we regularly offer reminders such as this one that it’s better to gauge tolerance for investment risk when times are good, rather than when market action stinks. While it may seem more…ehem…taxing to reduce equity exposure when markets are peaky, we often only need remind folks how they felt during March 2020 and March 2025 and suggest that an easing off the risk pedal might make for a more comfortable experience next go-round. Otherwise, when stocks are down, market history shows that decisions to “lock in loss” tends to lead to less-favorable longer-term outcomes.

Early Cycle or Long in Tooth?

The new S&P 500 record notwithstanding, there are a number of potential sources of shocks to the stock market narrative. As today’s back-forth demonstrates, domestic tariff policies remain undecided, their potential implications still wide-ranging. Medium-term domestic tax/spend policies, too, are yet uncertain. With the balance of proposed policies broadly set to increase the federal deficit, though, the potential impact on interest rates remains an open question. Meantime, inflation is within range of the Federal Reserve’s desired level, but progress toward that goal is halting. Tariffs may reverse that progress, perhaps only on a one-time basis, but perhaps not. Domestic macroeconomic growth remains healthy, but any of the above might curtail that strength. And we cannot forget that the wars in Ukraine, Gaza and Iran remain without visible ends or even meaningful progress toward such.

But all of these factors have been with us for more than a bit. And all have proved qualitatively volatile—meaning the potential range of answers to, “who knows where this will end up” has been in constant states of flux—and therefore prone to inducing bouts of angst and euphoria. One could argue, then, that the market has been climbing the proverbial Wall of Worry for some time now. But in many ways that’s always the case, as worries exist whether the drivers are known or unknown, existing or potential, expressed or held in silence.

Seeking to offset any concerns the above may have engendered, we offer the data in Figure 2, which show all the 20%+ drawdowns in the S&P 500 since 1949. Upon first glance, the chart seems pretty ugly. But those data are just a different way of expressing the more than 35,100% gain (8.08% annualized) in the index over that time frame through the end of May, it’s near 400% gain (8.3% annualized) over the past two decades and its 180% (10.8% annualized) gain since May 2015. Said differently, the reason we might fairly expect such generous long-term returns is that we must endure the range of risks and the market tumult those risks can create over time. The challenge is determining how much of that risk we are willing to take on such that we remain invested long enough to earn commensurate reward. Those interested in exploring potential answers to that task should reach out to an advisor.

Important Information

Statera Asset Management is a dba of Signature Resources Capital Management, LLC (SRCM), which is a Registered Investment Advisor. Registration of an investment adviser does not imply any specific level of skill or training. The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell any security or to participate in any trading strategy. Any decision to utilize the services described herein should be made after reviewing such definitive investment management agreement and SRCM’s Form ADV Part 2A and 2Bs and conducting such due diligence as the client deems necessary and consulting the client’s own legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of SRCM services. Any portfolio with SRCM involves significant risk, including a complete loss of capital. The applicable definitive investment management agreement and Form ADV Part 2 contains a more thorough discussion of risk and conflict, which should be carefully reviewed prior to making any investment decision. Please contact your investment adviser representative to obtain a copy of Form ADV Part 2. All data presented herein is unaudited, subject to revision by SRCM, and is provided solely as a guide to current expectations.

“U.S. stocks” are represented by the S&P 500 Index measures the performance of the large-cap segment of the U.S. equity market.

“Non-U.S. stocks” are represented by the Bloomberg World ex US Large, Mid & Small Cap Price Return Index, which is a float market-cap-weighted equity benchmark that covers the top 99% of market cap of the measured market.

“Our preferred fixed income benchmark” is the is the Bloomberg U.S. 1-5 Year Government/Credit Bond Index, which includes investment grade, U.S. dollar-denominated fixed-rate Treasuries, government-related and corporate securities with maturities between 1 and 5 years.

The opinions expressed herein are those of SRCM as of the date of writing and are subject to change. The material is based on SRCM proprietary research and analysis of global markets and investing. The information and/or analysis contained in this material have been compiled, or arrived at, from sources believed to be reliable; however, SRCM does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated thereby. Any market exposures referenced may or may not be represented in portfolios of clients of SRCM or its affiliates, and do not represent all securities purchased, sold or recommended for client accounts. The reader should not assume that any investments in market exposures identified or described were or will be profitable. The information in this material may contain projections or other forward-looking statements regarding future events, targets or expectations, and are current as of the date indicated. There is no assurance that such events or targets will be achieved. Thus, potential outcomes may be significantly different. This material is not intended as and should not be used to provide investment advice and is not an offer to sell a security or a solicitation or an offer, or a recommendation, to buy a security. Investors should consult with an advisor to determine the appropriate investment vehicle.