3.14.2025

History shows that how investors respond to periods like this plays a crucial role in long-term success. Those who follow a well-structured financial plan and stay disciplined are far more likely to reach their financial goals, while those who react impulsively often struggle to recover.

We Were Prepared for This

The S&P 500 is now in a correction, down more than -10% from its all-time high in February as of yesterday. While no one likes to see declines, it’s important to recognize that this follows an extended period of outsized gains. US equities returned more than +20% in both 2023 and 2024—over triple their long-term average annual return of +8% since 1999.

We anticipated returns at these levels would not continue, and we communicated that reality to investors. At some point, markets were bound to give back some of their excess gains. The only question was whether it would happen gradually or all at once. Often, a sharp reset is preferable to a prolonged, drawn-out decline. While the short-term direction of markets remains uncertain, history shows that over time, markets tend to move higher—rewarding patient, long-term investors.

Equity Returns Remain Strong Over Time

Despite recent declines, long-term investors are still in a favorable position. Even after the pullback, US equities have delivered +8%, +11%, and +17% annualized returns over the past one, three, and five years, respectively.

Market corrections and volatility are normal features of investing. For example, in 2020, the market declined -33.8% at one point, rallied +70.2% at another, and ultimately ended the year up +18.4% (see below chart). Intra-year swings often look dramatic in real-time, but they rarely dictate where returns ultimately settle.

Source: AMG, FactSet, S&P Dow Jones.

Diversification is Paying Off

While headlines focus on US stock market declines, broadly diversified investors are faring much better. So far this year, international equities are up +6%, bonds are up more than +2%, and many alternative investments—including private credit, real estate, and other real assets—are delivering positive returns. This highlights why diversification remains a critical tool for navigating market turbulence.

The Economy Remains on Solid Footing

Heading into 2025, the US economy was strong. Real GDP grew 2.8% in 2024, well above the 20-year average of 2.1%. While early 2025 data suggest some slowing, this is a natural transition as the effects of pandemic-era fiscal stimulus continue to fade. A slowdown from above-average growth is not the same as economic weakness.

The Bottom Line

Market corrections are a normal and expected part of investing—not something to fear. While volatility can be uncomfortable, history shows that disciplined investors who stay the course ultimately benefit. Your financial plan is designed to withstand short-term market swings, and your diversified portfolio is working as intended.

If you have any questions about your portfolio or want to discuss your long-term strategy, please reach out to your Cobblestone Relationship Manager. We’re here to help and remain committed to guiding you through these moments while keeping you focused on the bigger picture: preserving and growing your wealth for the long term.

Disclosure:  Unless stated otherwise, views, opinions or forecasts expressed in this blog are those of the author and do not necessarily reflect those of the Adviser and/or its employees. The contents of this blog are distributed for informational purposes, and are not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Nothing in these communications is intended to be or should be construed as individualized investment advice. All content is of a general nature and solely for educational, informational, and illustrative purposes.

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