Clarity Capital Management Notables - March 2025
CLARITY CAPITAL MANAGEMENT NOTABLES AUDIO VERSION
Quite a start to the year—one that seems to have escalated quickly! It’s been about a month since the S&P 500 hit an all-time high. Since then, we’ve seen a sharp and rapid selloff in U.S. stocks. As of Tuesday’s close, the S&P 500 is down about 8.5% from those all-time highs in February, while the Nasdaq is down nearly 13%. Many high-momentum tech stocks have declined by 50% or more from their all-time highs. Market corrections are always uncomfortable, and this one is no different—especially amid a highly unconventional presidential administration and the constant stream of political noise. In moments like these, it’s important to put market moves into context and look beyond the headlines to gain a broader perspective.
Stock market corrections are a normal and healthy part of investing. Every correction feels unsettling in the moment but often appears justified in hindsight—we’re confident this one will be no different once it’s behind us. Since 1950, the average intra-year stock market correction is about 14% from peak to trough. That said, each correction is unique—they vary in duration, magnitude, and cause. Often, corrections follow periods of strong market performance, acting as a necessary reset to keep valuations in check. Though it’s common to attribute corrections to specific events, they are usually a combination of factors.
From a headline perspective, it appears that much of this correction stems from uncertainty over the administration’s trade policies, with aggressive tariffs being implemented or threatened daily. Compounding this uncertainty are ongoing government spending cuts and looming debt ceiling negotiations—a combination that markets dislike. At this point, it’s not actual weak economic data driving the decline, but the anticipation of slower growth.
Looking deeper, some of this correction was likely overdue from a valuation perspective, with politics acting as the trigger. Many high-momentum tech stocks have experienced extraordinary rallies over the past two years, reaching unsustainable valuations. Now, those same stocks are leading the decline. Meanwhile, other asset classes—such as dividend stocks and value stocks—are holding up better, and some are even delivering positive returns this year. International developed markets, particularly European equities, are off to a strong start in 2025, with gains exceeding 15%! In some ways, the recent market rotation is healthy, shifting from overheated stocks into more reasonably valued areas of the global markets. This reinforces the importance of diversification—while the S&P 500 has been volatile, a well-diversified portfolio has likely experienced a smoother ride.
Keeping Perspective
It’s easy to feel unsettled by the constant flow of political and economic news. However, when viewed in context, this correction isn’t unusual. Corrections happen almost every year, and we tend to forget them once markets recover. So, what does this mean for you?
- If your portfolio is well-diversified, you’re likely experiencing less volatility than the U.S. stock market as a whole. You may even have some positions—such as international equities and bonds—that are positive year-to-date.
- If you’re still in the accumulation phase, keep investing! Lower stock prices create better long-term buying opportunities. The market never gives us an ‘all clear’ signal—it rewards those who stay invested through volatility.
- Don’t panic. Corrections always feel uncomfortable in real time, but they are a natural part of investing. No one knows how long this will last or where the bottom is, but history tells us that markets recover. Instead of reacting emotionally, focus on what you can control: staying invested, maintaining diversification, and ensuring your portfolio aligns with your goals and risk tolerance.
This too shall pass. Staying disciplined is key to long-term investment success.