The stock market has taken a dip in 2025, and headlines are swirling with uncertainty. It’s natural to feel uneasy during these times, but history and data remind us that market corrections are a normal part of investing.
Here’s why staying calm and staying invested is crucial:
1. Intra-year drawdowns are the norm:
- Market declines of 10% or more happen almost every year.
- Looking at historical data from 1979-2023, the average intra-year decline for the U.S. stock market was -14%.
- Despite these drops, the majority of years end with positive returns.
Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2024, over which time period the average annual return was 10.6%.
2. History shows: positive returns often follow market drops
- No one can reliably predict the magnitude of a market decline or the time to recover.
- Rather than guessing, sticking to a plan and resisting the urge to sell amid a decline often allows investors to capture the rebound when it occurs.
3. The power of time and diversification:
- Short-term market volatility is inevitable. However, historical data demonstrates that longer investment horizons greatly diminish the likelihood of losses.
- “Good things come to those who wait” holds true: long-term investors are generally rewarded.
- A blend of stocks and bonds has historically avoided negative returns over any rolling five-year period in the past 70 years.
Key takeaways:
- Market corrections are a normal part of investing.
- Diversification and a long-term perspective are essential.
- Avoid the temptation to time the market.
- Staying calm and invested is the most effective strategy.
Even though the market drop might worry you, it’s just a small dip in the big picture. Signet can help you stick to your plan and keep your eye on your long-term goals.
IMPORTANT DISCLOSURE
This is a publication of Signet Financial Management, LLC.
The information presented is believed to be factual, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Information in this presentation does not involve the rendering of personalized investment advice. It is limited to the dissemination of general information on products and services. A professional adviser should be consulted before implementing any of the options presented.
Information in this presentation is not an offer to buy or sell, or a solicitation of an offer to buy or sell the securities mentioned herein. Information on this presentation is directed toward U.S. residents only. Signet only transacts business in states where it may legally do so.
