Overall, in the large-scale, big picture comparison of historical events, 2025 was pretty typical. Before you stop reading because you think I must be detached from reality, I will ask for your indulgence to follow my thought process… please. Since our primary role in your life is as a financial advisor, I will limit comments to money when reflecting upon 2025.
Let’s begin with a short highlight reel of the major stock market / investment / economy events during 2025. However, please remember, “the stock market is not the economy, and the economy is not the stock market.”
Major US indices through mid-February 2025, (DOW, NASDAQ, S&P 500, & Russell 2000) were up 2% to 5%. On April 2nd, the US President announced a new trade policy and markets responded emphatically by declining approximately 12% to 22% depending upon the index. Over the next few weeks and throughout the year as investors realized that trade policy and tariffs could and perhaps will change, markets recovered and accelerated past that mid-year decline to finish the year higher (9% to18%) than the beginning of the year and (hold onto your hat) up 28% to 52% higher than the mid-year decline.
Good rule to follow: Don’t sell during a market decline. If you do, your chance of missing the next market increase is greatly reduced.
Critical point to understand: Over the past 25 years, the S&P 500 was below the January 1st value at some point of the year 25 times –every year! But finished up 18 of 25 years. So being down at some point during the year is not only not a surprise but is to be expected…I will repeat, a drop in the market is to be expected every year…so, it is not a surprise or a reason to be shocked or overly concerned.
This is the important part: Over those same 75 years, the S&P 500 finished the year not only higher than the mid-year low, but higher than the beginning of the year in 59 of those years (78% of the time). In fact, going back to __ the S&P 500 has lost money in X number of years: see the following chart for the numbers
Since 1950, the S&P 500 has lost money 16 times. Or made money in 59 of 75 years.
Since 1980, the S&P 500 has lost money 8 times. Or made money in 37 of 45 years.
Since 2000, the S&P 500 has lost money 6 times. Or made money in 19 of 25years.
Since 2007, the S&P 500 has lost money 3 times. Or made money in 15 of 18 years.
Since 2020, the S&P 500 has lost money 1 time. Or made money in 5 of 6 years.
Every year is different. Circumstances change. Politics, tax law, inflation, trade policy, industries, and borders all change as well. Yet the economy grows which in turn causes the stock market (made up of companies motivated by profit) to continue to grow – granted it is not a smooth path but historically an upward trajectory.
So, when I say 2025 was NORMAL. The mid-year decline in April with the recovery throughout the remainder of the year was not a surprise event.
Many years ago, a mentor of mine encouraged me to “control things that I had control over and to not worry about those things over which I had no control.” Wise words but difficult to live by.
In terms of your financial life, you have some control over: how long you work, how much you spend, how much you save, how you invest, and how you respond to financial / global / economic events. Events outside of your control include: when and how much markets go up or down, how long markets stay down or keep going up, actions and reactions to wars and rumors of war, actions or in-action by government, actions of an independent Federal Reserve, or how the mass of investors will react to any of the previous events mentioned.
As the new year of 2026 begins, I encourage you to take inventory of your last year, where you are today, and the intention of where you want to go in 2026. How much did you actually spend last year?How much money went out of the bank to spend for (1) basic living expense, (2) discretionary spending for fun stuff like travel, a new vehicle, home remodel projects, and (3) additions to investments. The point here is what did you need to spend? Versus, what did you decide you wanted to spend, or how much you saved?
Then look at where you are now. What are your revenue sources? Your job /business profit, Pension, Social Security, rental income, Required Minimum Distributions, and other predictable income. The last step is to decide what you want to spend in 2026 plus add a cushion for “stuff happens”. How does the income compare with your spending?
If the income is more than expenses, congratulations. If you are retired, this is great. Give more to charity or take a big trip and have some fun. If you are still working, then invest more.
However, if expenses exceed “dependable income” and you are retired then you will need money from the investments to sustain your lifestyle. This is also OK. You planned for it and worked for it, but calculate if the spending rate is sustainable –this is a different topic for another blog?
This is key, the money you will be spending from your portfolio for the next two years should be invested with no risk to the principle. Why you ask? Remember, control what you can control. You control spending (to a large extent) so therefore, you also control how much money is in “no-risk” investments but also don’t miss out when the markets are good.
However, you have no control over stock market performance during any short-term period (see the statistics previously given). Do not allow yourself, if possible, to be put into a position of “needing” to sell investments when markets are down. Therefore, plan ahead.
Control what you can control. That is all any of us can do. The hardest thing to control is emotions and reactions to scary stuff. Money can be emotional stuff, but it doesn’t have to be emotional. Our job is to assist you with your financial plan, properly allocate investments for long-term growth to be able to afford future large expenses to merely offset the impacts of inflation, to set money aside for near-term spending needs. Fred has been doing this for forty-six years and JC for a dozen. Take advantage of that experience.
Call with questions. Come into the office. Schedule a Zoom meeting. Live in the moment. My guess is that some of them will be exciting --- in many different ways.
Wollman Wealth Designs, Inc is a financial services and investment firm in Escondido, CA partnering with families, friends and clients in San Diego County and around the country. Please visit our website, call the office or send us an email with your comments or questions.
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All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. Past Performance does not guarantee future results. A diversified portfolio does not assure a profit or protect against loss in a declining market.