SPECIAL EDITION: Is It Time to Sell?

The S&P500, Nasdaq and the Dow are ALL down in the wake of more tariffs.  Is now the right time for you to sell? Brendan offers his thoughts on the volatility caused by Liberation Day

Transcript:

 Hey and welcome to a special edition of Coffee with Waymark. Day one after Liberation Day. These are the days that I call the big font days, and why do I call 'em big font days? Because this is pretty much what you'll see with any website that you hit today, whether it's a news website or a financial website, you'll see in big, bold letters how terrible the market is and all of that.

So, I've been doing this for well over 20 years now, which is kinda scary. And these days come and I have very logical conversations with people. More often than not, everyone kind of understands the market goes up, the market goes down, but they still feel very uncomfortable.

So that's usually where I then go into my market volatility folder, which I have here, which has all of the things that I have accumulated since 2014, every time the market has had a bump in the road, and I pull out the ones that I think are the most important. So I'm gonna go through the latest and greatest market volatility deck that I have that came from LPL.

I think there's some really good slides in here that hopefully will help you to understand what's going on, why market volatility happens and all that. This specific one I'll talk about in a moment, why the tariffs are causing such a dramatic response from the market. But let's just go through a little bit of a history lesson on the market and, and how volatility plays a role in it. 

So let's start here. Obviously everyone knows that stocks have risen over the long term, even when there have been some really crazy things. If you're looking at it over different time blocks since 1957 for instance, this chart is pretty much saying that if you look at any one year period, there's a 74% chance that the S&P 500 rose, if you look at it over a three year period, 85%, five year period, pretty close, 84%, 10 year, 92, and 15 year, if you're looking at any 15 year timeframe, since 1957, a hundred percent of the time, the market has been positive.

When I say the market, I mean the S&P 500. This is a chart that I've seen in many, many different iterations, but ultimately it says the same thing: that timing the market, getting into and out of the market at the wrong time, is killer for your portfolio. And I always explain to people that you have to be right twice.

So if you call me and you say "I've had enough. The market has dropped too much. I'm nervous about what's gonna happen. I want to sell." I'll say to you "Okay, great. We'll sell today. When are we getting back in?" Everyone gets a little bit perplexed by that question. They're expecting that I'm gonna push back and say, “No, you shouldn't. You shouldn't, because the market has always  recovered and everything's always been great,” but if I do call your bluff and I say, "Okay, great, we'll sell today, but when are we getting back in?" That usually causes people to take a step back because you have to be right twice.

So let's say the market's coming down. Let's see, let's use 2008, which everyone remembers. So, someone will always say to me, “In 2008, I had this neighbor. I had my brother-in-law. I had this person that I knew who got out of the market right before it tanked.” 

I said, “Great, good for them. When did they get back in?”

"Oh, I don't know that answer." 

Then you don't know the full story, because ultimately if you get into the market or you get out of the market, when it goes down, great, and if the market keeps going down, you've won. But you have to get back into the market down here or somewhere between here and there. Otherwise you're gonna lose money. And what most people do is they wait. And they get back into the market when the market's higher than what they sold at. They lost money in that regard, and that's what this chart is pretty much saying is that if you miss, since 1990, if you get out of the market and then miss the five best days, you lose 4%. You miss the 10 best days, you lose 12%, et cetera. It's hugely costly to do this and do this and do this wrong. And most people do - because you have to be right twice. 

So we all know about this. This is an important chart here because what this is pretty much saying is that the market, as you can see down here, the market tends to go up. So this is, if we're looking at the positives about 75% of the time as we saw in the chart before the market goes up. But in those years where the market goes down and where the market goes down sharply, yeah, it has the potential of going down 25% or more like 2008 and 2019, 74… 

However, guess what? Where was 2009 and where was 1975? A year later? Guess what? They're over in the green. So 2009 you can find right here. So it was probably up 15% and then 1975 was up 25% or more.

So again, when the market goes down, typically the market swings back pretty quickly. Again, if we look at all of these, 2008, 1974, and we look at 2009, 1975, 2023, which was a year after 2022, 2003, a year after 2002 and 1974. The only time when the market was down in these five times was 1974. So 1973, the year later, 1974, really bad. But the rest of them were all in the green section. So when the market bounces back, it bounces back pretty sharply. Market pullbacks are common. This is how many times a year the market has pulled back 5 to 10%. And then if we look at 10 to 20%, we see that's not that uncommon either - about an average of one per year and then volatility.

I'd get into that in a little bit. But stocks have grown. And then, this is another chart pretty much saying what I said earlier, which is when the market drops. 10 to 20% within three months, six months and 12 months. The market is typically positive and positive by a pretty significant amount, which is what I showed you in the last one.

So let me shift gears and talk a little bit about this particular market that we're engaged in now and why it seems like especially, and I have a chart that I could show you that shows that, no big surprise, when there's a Republican as the president, Republicans tend to view the economy as very good. And vice versa, Democrats don't look at this positively. So what I found with this specific one, with this Trump presidency, and again, I joked about the liberation day - that's what Trump named it.

What's happening and why people are getting so anxious. This is the psychological part and the behavioral finance part of the conversation. I think everyone knows that stuff that I just showed you a moment ago. Everyone knows that long term, the market does fine and there are bumps in the road and whatnot.

But for whatever reason, this particular presidency has caused people to be much more reactive. And I've had clients that have historically weathered the ups and downs pretty well, but this particular drop that we've seen in 2025 has really unnerved them. And I think what's going on, and so I'm gonna put my psychology 101 hat on, is that constantly, we're always doing this: We're assuming that there's a lot of possible things that could happen, but not many probable things that happen. So there could be a meteor that falls on us. There could be whatever, some kind of cataclysm - China could invade, Russia could invade, whatever. Those were all possible things, but we discount them because it's possible, but very unlikely. Then there's the probable things. The stock market might go down. Yeah, probably that would happen. There may be, we may get involved in a car accident, probably at some point in our life we'll have that happen.

So we've just mentally accepted what the probable things are and almost discounted the possible. I think what's happening, and again, this is me putting my psychology 101 hat on, is that I think that especially among the Democrats and the more liberal leaning clients, they've thought of Trump as a little bit of a boogeyman and dreamed up a lot of things that could, that, that he could put in place that would be very bad.

And what's actually happened is some of those things that you had dreamed as possible actually have come to fruition. And so now I think what's actually happening is people are saying if some of those possible things are now the probable things, what are the possible things could be going on that tomorrow will actually happen?

And I think that's what's getting some of my clients who have been pretty even keeled, but are really starting to freak out about things. And so what this chart is showing and the key thing is, I've heard this from a number of my more liberal clients where they say, this time is different. And insert all the negative things about Trump, which I won't repeat here because I'm trying to stay above the politics here. But the key point that they're saying is that we've never seen this before. This is unprecedented. Unprecedented. I've heard that so many times.

And the reason why I show this chart here. Is that every single one of these events was always thought of as a possible thing, but not a probable thing. And it caused big reactions in the stock market. But we've gotten past every single one of them. We've dealt with it. And I think one of the key things when it comes to investing is that the markets are not static. They're dynamic. And for instance, last night was Liberation Day for America. And we announced a lot of tariffs. And the market right now is responding very negatively to that tomorrow, the next day, in a week. The world will adjust to that very dynamic.

Some of the things might be good, some of those things might be bad, but at least historically speaking, the market and the economies of the world have always pivoted and adjusted to whatever has happened. Like all these things that are up on the screen right now, and we've gotten through them, again, long story short, I can't promise anything. I don't know if this is gonna be a temporary thing and by the end of the year we'll be looking back at this as just a speed bump. The way that you know, remember, just a few years ago we had the Silicon bank failure, and a bunch of regional banks were having a lot of trouble, and right around this time, right around March, April timeframe, people were really nervous that these regional banks would expose some kind of cancer in the banking system. The market had a really strong reaction to that. But if I asked the majority of you, remember when we had that, you couldn't recall that, but at the time, I got a lot of phone calls and there was a lot of nervousness about that because again, multiple banks failing could lead to another 2008.

It ultimately didn't happen. The market had two straight years of 20% plus rates of return in 2023, 2024, after all that happened. But again, right now a lot of us can't even remember that. I don't know if that will happen. Obviously anything can happen with the markets. But this does feel like, yes, it might be unprecedented, but at the same time it could be, as Mark Twain put it:  history, while it doesn't repeat itself, it certainly rhymes. 

And that's what I feel like right now - I can't promise anything again, can't promise what's gonna happen, but it does feel like just another normal big font day. That's all I got for you. 

I hope this is a good little pep talk for you, just to get, to, give you a little bit of context and something different than what the cable news networks are talking about with their big fonts and all the doom and gloom that they're probably pedaling today and probably for the next several days.

Thanks for listening and remember to be well and do good.

Brendan is the Managing Director for Waymark Wealth Management. He has extensive experience in comprehensive wealth management. His focus includes retirement planning, behavioral finance, investment portfolio construction, education funding, insurance & risk management, taxes, charitable giving, and estate planning. Brendan has an ability to take clients' complex visions and distill them down to simple action plans, helping them move from where they are today to where they want to be tomorrow.

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The opinions voiced in this video are for general information only and are not intended to provide specific advice or recommendations for any individual.