Q1 is in the books! There was finally some market-moving news besides the Fed’s interest rate policy. Unfortunately, it pushed both the stock and bond markets down—even with the giant run up the last day of the month. The NASDAQ 100 and the DOW both hit Correction territory, while the S&P500 isn’t quite there yet. The headline news is geopolitical in nature with the bombing of Iran’s weapon capabilities, but the part that’s moving the markets is the oil supply. Oil volatility seems to swing in wide patterns. If oil rockets up, the stock markets want to go down and vice versa. We were already sitting at record highs, so the markets were looking for any reason to sell off. This seems to be the answer.
Any time drawdowns happen, I always like to see how often they actually happen. Every time I do, I’m reminded that this is a part of a completely healthy market environment. It’s also the price we pay to try to get those bigger returns than a safe investment. Here’s what I’m reminded of:
- We’re in a midterm year where the average drawdown is 18%.
- The forward 12-month P/E ratio for the S&P 500 is at 19.9 which is equal to the 5-year average.
- Carson Group visualization of S&P500 Annual Returns Distribution shows heavily skewed to positive side.
- Another interesting tidbit…there have been 105 5% pullbacks before, and only about 12% turned into a bear market. And the stock market has a negative return about every 4 years.
- At this point, we are where we were only six months ago when we were euphoric about all time highs. It hasn’t been that long!
Okay, so what does all this mean—that we’ll never go down again? Of course, not—the Q2 of a mid-term year is also generally the worst quarter of a four-year presidential cycle. It’s not a sure thing, but a lot of it depends on whether oil prices come back down. Volatility is the price we all pay so that we can try to achieve better long-term performance than those safe bets like CDs and money markets. My assumption on the return to upside gains is that the Strait of Hormuz gets opened back up fairly quickly, and the markets regain their losses quite fast. Of course, that’s just my simple opinion, but it seems to be the primary driver of this downturn so it makes sense that the reverse should happen.
Until then, we maintain our headings and enjoy the start of Spring!
If you didn’t get them last time, I’m including the retirement account limits again below.
Here are some housekeeping updates for your 2026 401k and/or IRA for under/to 50+ years old.
- IRA max contribution $7,500/8,600 (Don’t forget that IRA’s have income limits so check with us before you max out.)
- 401k max contribution $24,500/32,500 (“Super” catch-up now for ages 60-63 allows up to $35,750.)
- SEP IRA max contribution $72,000 (Watch out for the 25% cap)
- SIMPLE IRA max contribution $17,000/21,000
If you’re a high-earner and get an Employer match, it might be worth it to use static dollar amounts rather than a percentage of salary to avoid maxing out before the end of the year.
You are essential to our firm, and we appreciate you being a part of it with us!
Happy Easter!!!
Larry Mroczkowski
President
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.