Market Commentary

Corrections

By Rob Sigler, MBA

March 28, 2025

Policy uncertainty on tariffs, federal employment levels, and immigration is sapping business and consumer confidence presently.  Economic data clearly show that the U.S. economy is slowing.  Meanwhile, the S&P 500 Index dipped into a correction earlier this month in response (defined as falling 10% from its 52-week high).  Many worry that recession risks are rising.  Why aren’t we panicking?  First and foremost, this was a scenario that we planned for and anticipated.  You may recall within our Top 10 Surprises of 2025; we highlighted our belief that the U.S. would encounter a shortfall on economic growth.  We posited that the incoming administration’s policies were going to be contractionary and that is indeed what has transpired.  Our portfolios have been built with adequate diversification and uncorrelated assets to weather such a storm.  In fact, the majority of our client portfolios have produced positive returns during 1Q25.

What can we expect going forward?  I’ve attached the following illustration that follows the average path of the S&P 500 following a 10% correction in both a recessionary scenario, and one where recession is averted.  The averages tell us that if we avoid recession, most of the damage is behind us.  Conversely, if economic conditions continue to erode, we have a longer path towards improvement ahead.  Either way, our portfolios have been built with ballast and will withstand this challenge.  We continue to believe that this is an advantageous time to buy longer dated U.S. Treasury Bonds, high quality, asset backed securities and corporate bonds, as well as a time to lean into various alternatives like private infrastructure, triple net lease real estate, distressed debt and real estate credit, as well as private equity.

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