The Week in Review: March 17, 2025
Entering a Market Correction
According to the U.S. BLS, the February Consumer Price Index rose 0.2%, softer than expected. The core CPI, which excludes food and energy, also rose 0.2%. The core CPI slowed to an annual rate of 3.1% from 3.3% in January. February’s rate was the slowest since early 2021.
But the CPI is backward-looking. It reflects February’s data, and many are fretting over what may happen to inflation in the coming months, given the threat of new tariffs and tariffs that have already been levied.
It is one reason why the S&P 500 Index entered its first correction (down at least 10%) since late 2023, according to St. Louis Federal Reserve data. The index, which reached its peak on February 19, is down 10.13% at its most recent low on Thursday, March 13.
If you are a new investor, this might be concerning. But seasoned investors understand that market pullbacks happen regularly. Forecasting them, however, is another matter.
Since 1980, the average annual maximum drawdown in the S&P 500 Index has been 14.0%, according to LPL Research. Yet, we also recognize that the long-term upward trend in the major U.S. market indexes has been positive.
In the near term, economic growth may be losing some of its luster. Unusually cold weather may have kept some folks at home earlier in the year. That’s temporary. But the Wall Street Journal noted last week that several retailers have recently highlighted the uncertain mood among consumers.
Additionally, Moody’s Analytics pointed out in February that soaring stock and asset prices have helped well-to-do Americans disproportionately fuel consumer spending. A big pullback in stock and housing prices could have “clear implication for the economy,” Moody’s said.
We never want to overlook potential risks, as risks never completely abate.
The financial press, however, recognizes that fear and drama grab eyeballs. Sometimes, fear can be the loudest voice in the room.
Let’s review a smattering of worries over the last 15 years.
The eurozone debt crisis of 2011-12
The double-dip recession chatter in 2011-12
The fiscal cliff 2012
The collapse in oil prices mid-2010s
Brexit in 2016
Recession fears in 2018-19
The pandemic lockdowns
Recession fears 2022-23
All affected stocks to varying degrees. All were temporary. Rebounds began when the outlook appeared to be at its bleakest. And few analysts called the bottom.
Market pullbacks may be unsettling for some, but attempting to predict or guess what might happen next has rarely been a good strategy. Economist Nouriel Roubini got it right in 2008, but his record since then has been blotchy at best. No one has a crystal ball.
Market Summary
TWO FOR THE ROAD
“The four most dangerous words in investing are: ‘This time it’s different.’”
- Sir John Templeton“Waste is a tax on the whole people.” - Albert W. Atwood, Economist
Please do not hesitate to contact me with any questions or concerns.
I hope you have a great week!
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.