This Too Shall Pass
By: James C. Denton, CFP®, Retired, Founder
March 11, 2025
Anybody who knows me at all knows I don’t spend any time defending President Trump. I didn’t vote for him (and not Harris either) because I don’t agree with him on many issues. My biggest dissatisfaction, however, is more around non-policy issues than on tariffs, for example, on whether he should dismantle the CFRB or IRS. That said, I would also ask that you not take anything in this article to be a political position, one way or the other. I am a polemicist by nature, but this ain’t that!
The bottom line up top … all of this market turmoil this week will pass, and probably sooner than later. Agree with Trump or not, like him personally or not, one thing I believe to be certain. He is no dummy, he understands the markets, he is as self-centered as any of us, and he likes being wealthy. In other words, ultimately he will not make permanent, any policy positions that threaten his own wealth or yours. So, as I have preached with results to support for 35 years, you have a game plan which recognizes that market turmoil will happen, short term heart stopping corrections (and even the occasional bear market) will occur, and you must stick to that plan if you are to survive and prosper through the volatility which is unavoidable.
The fact is I agree with the president on many of his perceived issues and goals. The government is bloated, both with regards to expected and intended outcomes, and with staffing to achieve reasonable governmental objectives. In spite of, or perhaps because of too much to do and too many to do it, there is much waste, fraud and abuse. The executive – the President - is ultimately responsible for establishing and executing policy, but that policy should be consistent with the national will. I don’t agree with this chainsaw approach, but incremental change at the margins is not going to get the job done either.
I would like to believe that there is a method in the administration’s madness. The Silicon Valley approach: move fast and break things. This would not be my prescribed approach were I president, but I’m not, and I’m not sure there’s a better way if the desired result is to move with purpose and fix things. Intentional change is desirable and good. I think most of us would agree “we’ve always done it this way” is what has created the dysfunction that currently exists even if we do not agree on what is dysfunctional and what needs to be preserved. We’re always adding new programs without reviewing the old ones and a $37 trillion national debt and a >$2T deficit in the current fiscal year is what we have to show for it.
That specific dichotomy is what the national debate should be about, and that’s why we have elections. We did legitimately elect Joe Biden, and we lived for four years with the consequences of that election. And we did legitimately elect Donald Trump and now it’s his turn. We should hold him accountable for the results of his actions and that’s what the next election (in two years, as it happens) will be about.
So if you are asking the perennial question, “What does it all mean?”, and like a lot of us, you’re not sure you’re comfortable with the answer, what about the strategy of converting to cash or some other alternative investment and just sit out the next two to four years? I can think of three immediate problems with that approach, problems which always exist with a market timing strategy.
First, every single one of our portfolios from the newest or oldest are sitting on very significant unrealized capital gains. Even with this sharp correction, the positions showing losses are limited and the taxable gains are immense, into the hundreds of thousands of dollars for some if not many. So if you liquidate or even reallocate, you will pay huge capital gains taxes, magnifying your losses, and regardless of what happens to the market, recovery or continued doldrums, those funds used to pay taxes will not be available to invest and grow.
Secondly … market corrections share consistent and predictable characteristics. They are unpredictable in timing and unavoidable events, and the recoveries are equally unpredictable as to timing, but more importantly, often very sharp initially. Historically the best market performance has occurred in the earliest movement of a significant market upturn and in recent years the “V-shaped recovery” has become almost a paradigm. The market timer experiences the worst performance when the bear markets begin (and we may have already seen the worst part of this one) and misses the best part waiting to see if the recovery is real. These very real and predictable consequences are the reason the vast majority of investors and investment managers alike fail to fully benefit from the positive elements of a long-term market strategy.
And finally … “What alternative investment?” If the market performance the bears and naysayers are predicting comes about, interest rates for cash will return to near zero or worse. We’ve lived through that movie. And you know what my views are on bonds (or if you don’t you can look elsewhere on the website because it’s not a secret). The stock market – for you and me anyway – IS the only game in town.
So the upshot is there’s never a recognizable good time to sell the market and there is rarely a bad time to buy it. Because over longer time periods, the market has always rewarded a disciplined, diversified, long-term strategy. That’s what you have now, and there’s not really any good reason to change it. At least not now.
Content in this material is for informational purposes only and not intended to provide specific advice for recommendations for any individual. All performance referenced is historical and is no guarantee future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor's 500 Index is a capitalization weighed index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Stock investing includes risks, including fluctuating prices and loss of principal.