Market Note 4/1/2025: Tariffs & Uncertainty

It is already April and we hope everyone is doing well. We wanted to write to let you know your quarterly statements for the quarter ended March 31 will be placed in your Box accounts within the next several days. We also wanted to provide a Market Note. We always provide one this time of year, but since we have experienced a recent downturn in the market, we especially wanted to share our perspective on the subject.

Many may be wondering what is going on with the markets. First, the market (S&P 500) has pulled back by 10%, which is the first 10% selloff since October 2023. A selloff of 10% or more, but less than 20% is considered a “correction.” Corrections occur once a year on average, so that combined with very high valuations are partial explanations for this correction we are experiencing. So, we were due for one and the fact that we are going through a correction in itself is not noteworthy.

It does not mean that there aren’t some risks ahead of us that the market is trying to price. We should note, this was the 5th fastest correction since WWII. Those risks that have spooked the market include a growth scare brought on by the increasing likelihood of tariffs and countervailing tariffs (tariffs put on as retaliation against initial tariffs). What was originally a “growth scare” has since evolved into actual observable slowing economic growth which is not what the market anticipated late last year when it went on a run. That downturn from high expectations to lower reality reduces market valuations. On top of that, there has been a recent uptick in inflation meaning greater constraint on the Federal Reserve in its ability to lower interest rates and also a drop of 12% in consumer sentiment from February to its lowest reading since November 2022. Consumer sentiment influences how much consumers spend and thus economic activity. Because of the confluence of all of these factors, Wall Street strategists are lowering their year end targets from where they were and Goldman Sachs says the current probability of a recession is 35%.

Okay, so what do we do putting this all into a historical context? David Waddell, CEO of Waddell & Associates, recently wrote the following:

“Buying into the last 15 corrections rewarded investors with positive returns 87% of the time over the next year. In two of the occurrences or 13% of the time, selling into the correction proved prescient.”

Yes, sometimes corrections can turn into bear markets, but that is not the current consensus expectation from Wall Street. It is true, probabilities of one taking place are increasing as are credit spreads (an indicator of market risk) are widening. More often than not (and we want to win more than we lose by choosing the course of action with highest probability of success), not selling after corrections because of fear or news headlines is the best way to position and grow a portfolio and build wealth over time.

Here is the final thing. None of our clients are more exposed to the stock market than they should be. When we set up your portfolio and as we continually review your situation, we are constructing portfolios based on 1) your feelings and attitudes towards risk, 2) your household risk capacity and 3) your household return needs. All three are critical.

To learn more about Meridian's market views and how they are incorporated into investment portfolios, reach out to us to schedule an introductory phone call at (843) 212-6828 or contact@meridianria.com.

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About Joshua

Joshua Henry is the founder and Managing Principal of Meridian Financial Advisory (meridianria.com), an independent, fee-based wealth management company located in South Carolina, serving people locally and across the country, that focuses on providing wealth management solutions primarily to affluent individuals over age 50 and their families. Joshua is passionate about helping people have a better life by designing and implementing customized financial plans that bring clarity and confidence. Joshua is a CERTIFIED FINANCIAL PLANNER™(CFP®), a Certified Investment Management Analyst® (CIMA®) Professional, and earned a Bachelor of Arts degree in Political Science from Cedarville University and a Master of Business Administration degree with a concentration in Corporate Finance from Salve Regina University. The courses for the Corporate Finance concentration were taken from the Kelley School of Business at Indiana University. He has held workshops on Social Security Claiming Strategies, IRA Planning, and Career Coaching for Executives in between jobs. Josh has also taught finance at the university level. When he’s not working, Josh teaches adult Sunday School at his church in Pawley Island, SC. He enjoys traveling, reading, working out and time with his family. To learn more about Josh, connect with him on LinkedIn.