Week of March 17, 2025

Key Points for the Week

• The S&P 500 fell again last week, but for the third week in a row rallied on Friday, this time with its best day of the year.
• The big story was that the S&P 500 officially moved into a “correction,” declining more than 10% off its February 19, 2025 recent high.
• This early year weakness is not unusual, and even some of the best years can have corrections.

Current Trends & News is a weekly financial recap curated by SPC Financial®’s team of wealth management and tax-integrated advisors.* We monitor and explore the intricacies of the financial world and share insights into market developments.

Economic Update

Last week, the Standard & Poor’s (S&P) 500 Index moved into correction territory. The Nasdaq Composite Index (Nasdaq) was already in a correction, and the Dow Jones Industrial Average (Dow) was close, reported Paul R. LaMonica of Barron’s.

A correction occurs when the value of an index drops 10 percent below its most recent peak. The S&P 500 correction occurred remarkably quickly. Just three weeks ago, the index was at a record high amid easing inflation pressures and solid earnings growth.

In fact, from December 15 through March 6, the number of companies mentioning the word “recession” on earnings calls was the lowest it had been in more than five years, reported John Butters of FactSet. There is another word that was mentioned frequently on earnings calls though: tariffs.

Tariffs

The tariff war escalated last week as the European Union (EU) and Canada introduced retaliatory tariffs in response to those of the United States, reported Joe Light of Barron’s. Brendan Murray and Alex Newman of Bloomberg have been tracking the tariffs. Through the end of last week, the United States government has imposed the following tariffs:

• 10% on all goods imported from China (February 4)
• An additional 10% on all goods imported from China (March 4)
• 25% on some Canadian imports (March 4)
• 25% on some Mexican imports. (March 4)
• 10% on Canadian energy and potash (March 4)
• 25% on steel and aluminum from major exporting countries (March 12)

“As Americans debate the wisdom of the administration’s on-again, off-again trade barriers…a few broad points are worth bearing in mind. One is that these measures are a tax on Americans. Foreign countries do not simply pay up; US companies do when they import a product. This means that the costs are ultimately borne by consumers and by companies that use imported inputs. The effect of those higher prices is to eat into household budgets, push down real wages and reduce economic growth.”

The Editorial Board at Bloomberg

The trade war has raised questions about the path of the U.S. economy, and some economists have lowered their forecasts for economic growth in 2025, reported Brian Swint of Barron’s.

The primary driver of U.S. economic growth is consumer spending and consumers – anyone and everyone who buys things – are feeling less optimistic. Last week, the University of Michigan Survey of Consumers reported that sentiment fell 10.5 percent from February to March.

“Sentiment has now fallen for three consecutive months and is currently down 22 [percent] from December 2024. While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions, and stock markets. Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan.”

Surveys of Consumers Director Joanne Hsu

Major U.S. stock indices fell over much of last week before recovering some losses on Friday. The S&P 500, Nasdaq, and Dow all finished the week more than two percent lower. U.S. Treasury yields bobbed lower before finishing the week close to where they were the previous Friday.

This Week in the Markets

The S&P 500 moved into a “correction” on Thursday of last week, defined as a close at least 10% below the index’s recent closing high. Here are some things we know about corrections, which we will look at in depth this week.

• Corrections are normal, the S&P 500 averaging 1.1 corrections per year since 1928.
• Corrections happen for a reason, and it is always tempting to see that reason weighing even more on stocks. Most of the time it does not. Historically, the S&P 500 has come fully out of the correction about three times as often as it has entered a bear market.
• Emotions start to run high during corrections and many investors become more prone to making costly investment mistakes.
• The best defense against corrections is to understand that they are a normal even in good markets and have a plan ready for when emotions take over, because when you are in a correction it almost always feels like this one is the exception that justifies abandoning your plan.

These guidelines do not mean we ignore context. In last week’s commentary, we looked at tariff policy, the market uncertainty it was creating, and what was going on in the broader economy. But whether we are looking at the current state of the economy or market history, our focus is always on facts over feelings.

This week we are focusing on the history of market corrections because we think the context is extremely important and an essential starting point for understanding the current market.

Yes, the S&P 500 Is Now in a Correction

After another big down day on Thursday, stocks officially fell into a correction, with the S&P 500 down more than 10% from the February 19 peak. Although this has not been fun, we cannot say it was not totally unexpected, as late February to early March is one of the more seasonally weak times of the year, not to mention the first quarter of a post-election year is one of the weakest quarters in the four-year presidential cycle. Here is a chart we have shared a lot that shows just this. On top of that, factor in that the first quarter after a year with a 20% gain tends to be weak and that the past 20 years the first quarter has been weak in general, and things were ripe for some volatility early in 2025.

Another popular chart we have shared a lot is how 10% corrections tend to happen once a year on average. Given we did not have a correction last year, you could say the odds were even higher we could have one this year.

We are in the middle of a seemingly escalating trade war with uncertainty dominating everything. Markets can take good news, they can even take bad news, but they hate uncertainty and we have a lot of it.

Still, over the past 46 years this is now the 24th year with at least one correction at some point during the year, meaning these corrections happen a lot. Of course, not all corrections become bear markets. We found 16 years that stocks had a correction but did not fall into a bear market that year. Over those 16 years stocks gained a solid 9.5% for the year and were higher for the year 10 times. Remember that since 1950 stocks are up 9.5% on average.

The average year sees a 14.0% peak-to-trough correction and the years that have fallen 10% at some point, but finished the year higher, ended up with a 17.5% average return for the year. With the S&P 500 down 4.1% for the year, there’s still time for it to get back to positive and maybe even by a large amount.

The S&P 500 peaked on February 19, 2020 before the Covid bear market and then we had another bear market in 2022. We have never seen back-to-back bears so close (only 1.9 years apart). If we did that would be three bear markets starting within five years of each other, breaking the previous record of nearly seven years between 1966 and 1973.

Also, this decade now has two bear markets and the only other decade with three is the 1960s (based on when the bear market started). Could we have three bear markets in only half a decade?

What Should You Do?

The “Magnificent 7” Mega cap technology-oriented stocks did great the past two years, but they have been hit hard this year, reminding all of us why it is important to stay diversified.

• Tesla down 50%
• Nvidia down 23%
• Apple down 19%
• Alphabet down 21%
• Amazon down 20%
• Microsoft down 19%

Collectively the drop in value of these 6 stocks has exceeded $1.5 TRILLION.

Know that volatility is the price we pay to invest and stay the course and stay diversified.

Keep Your Eyes on Your Financial Goals

While it is never comfortable to watch the value of savings and investments fall, as they do during a market correction, it is important to remember that the decisions you make today can have a significant effect on the value of your portfolio over the long-term. During market downturns, investors generally have three choices. They can:

1. Sell and take a loss. The thinking behind selling is usually something like this: If I sell, I will cut my losses and preserve what I have. Investors who do this realize a loss of principal.

“A lesson many investors have learned is that if they sit tight and wait for the upturn to come, they will not realize a loss. In fact, they may even see their portfolios gain more value than they had before the downturn.”

Richard Bet, Investopedia

2. Sit tight. Investors who stay invested recognize that a market decline is not the same as a loss of principal. These investors understand that staying invested through market ups and downs can help them reach their long-term financial goals. The odds of a positive return increase with the amount of time an investor holds a stock or stock portfolio, explained Trevor Jennewine via Nasdaq. Historically, the chance of the S&P 500 Index delivering a positive return were:
3. 59 percent over a month period.
4. 69 percent over a year.
5. 79 percent over five years.
6. 88 percent over 10 years.
7. 100 percent over 20 years.
8. Look for opportunities. A lot of investors recognize that market downturns create opportunities to purchase shares of attractive companies at lower prices. These investors work with their advisors to identify opportunities that may benefit their portfolios should the market recover. The goal of investing, after all, is to buy low and sell high.

A Reminder About Scams

Scams usually start with a phone call, email, text, or another form of communication. The person typically claims to be from an agency or organization you know – or one that sounds like it might benefit you, such as the National Sweepstakes Bureau or a lottery.

The person may know your name and address. They may give you their official title or an identification number. No matter how official they seem, you can be confident it is a scam if the person contacting you:

• Indicates there is a problem with your benefits.
• Asks you to pay to receive a prize.
• Suggests that paying will increase the chance of winning.
• Requests financial information, such as a bank account or credit card number.
• Pressures you to act immediately.
• Tells you to pay using a specific method, such as a gift card or cryptocurrency.

If this happens, remember that the Social Security Administration, the Internal Revenue Service, Medicare, and your bank do not call, email, or text to ask for money or personal information. They do not demand that you pay immediately, and they do not accept payment by gift card, prepaid debit card, cryptocurrency, or another untraceable form of money transfer.

When you suspect a scam:

• Hang up or close the message. Do not respond in any way.
• Remain calm.
• Think back over the call. Write down any personal information you may have inadvertently shared.
• Report the scam. Contact the Federal Trade Commission at ReportFraud.ftc.gov. You may also want to report the incident to your state’s attorney general or your local consumer protection agency.
• Share your knowledge. Talk with family, friends, and neighbors about your experience so they know what to look out for.

When you receive a digital message, no matter how official it seems, do not click on any links. Do not give or confirm any personal information, including your name, birth date, phone number, address, email address, place of birth, driver’s license, passport, or Social Security numbers, bank or other account numbers, and PIN numbers.

Being skeptical can keep you safe. Remove yourself from the situation. Do not share information. If you feel anxious and need to confirm that it was a scam, contact the organization using a method provided on their official website.

IRS Urges Taxpayers to Not Fall Prey to “Ghost Tax Preparers”

A common problem seen during tax season, “ghost preparers” pop up to encourage taxpayers to take advantage of tax credits and benefits for which they do not qualify. These preparers can charge a large percentage fee of the refund or even steal the entire tax refund. After the tax return is prepared, these “ghost preparers” can simply disappear, leaving well-meaning taxpayers to deal with the consequences.

While most tax professionals offer quality service, these ghost preparers and other unscrupulous preparers try to take advantage of people and should be avoided at all costs. The IRS encourages people to use a trusted tax professional, and IRS.gov has important information to help people choose a reputable, accredited practitioner.

Warning Signs to Look Out For

Most tax return preparers provide honest, high-quality service. But some may cause harm through fraud, identity theft and other scams. Paid preparers must sign and include a valid preparer tax identification number (PTIN) on every tax return. A ghost preparer is someone who does not sign tax returns they prepare. These unethical tax return preparers should be avoided, especially if they refuse to sign a complete paper tax return or digital form when filing electronically.

Taxpayers are also encouraged to check the tax preparer’s credentials and qualifications to make sure they are capable of assisting with the taxpayer’s needs. The IRS offers resources for taxpayers to educate themselves on types of preparers, representation rights, as well as a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to help choose which tax preparer is the best fit.

Some of the warning signs of a bad preparer include:

• Shady fees. Taxpayers should always ask about service fees. Shady tax preparers can ask for a cash-only payment without providing a receipt. They are also known to base their fees on a percentage of the taxpayer’s refund.
• False income. Untrustworthy tax preparers may also invent false income to try to get their clients more tax credits or claim fake deductions to boost the size of the refund.
• Wrong bank account. Taxpayers should also be wary of a tax preparer attempting to convince them to deposit the taxpayer’s refund in their bank account rather than the taxpayer’s account.

Good preparers ask to see all relevant documents like receipts, records, and tax forms. They also ask questions to determine the client’s total income, deductions, tax credits and other items. Taxpayers should never hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is also against IRS e-file rules.

Report Fraudulent Activity and Scams

The IRS highly encourages people to report tax return preparers who deliberately prepare improper returns and any activity that promotes improper and abusive tax schemes.

To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242 – Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242 and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail: Internal Revenue Service Lead Development Center MS7900 1973 N. Rulon White Blvd. Ogden, UT 84404 Fax: 877-477-9135

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary award.

Did you Know? This Week in History

March 18, 1852: Wells and Fargo Start Shipping and Banking Company

On March 18, 1852, in New York City, Henry Wells and William G. Fargo join with several other investors to launch their namesake business, today one of the world's largest banks.

In 1857, Wells, Fargo and Co. formed the Overland Mail Company, known as the “Butterfield Line,” which provided regular mail and passenger service along an ever-growing number of routes. In the boom-and-bust economy of the 1850s, the company earned a reputation as a trustworthy and reliable business, and its logo—the classic stagecoach—became famous. For a premium price, Wells, Fargo and Co. would send an employee on horseback to deliver or pick up a message or package.

Wells, Fargo and Co. merged with several other “Pony Express” and stagecoach lines in 1866 to become the unrivaled leader in transportation in the West. When the transcontinental railroad was completed three years later, the company began using railroad to transport its freight. By 1910, its shipping network connected 6,000 locations, from the urban centers of the East and the farming towns of the Midwest to the ranching and mining centers of Texas and California and the lumber mills of the Pacific Northwest.

After splitting from the freight business in 1905, the banking branch of the company merged with the Nevada National Bank and established new headquarters in San Francisco. During World War I, the U.S. government nationalized the company’s shipping routes and combined them with the railroads into the American Railway Express, effectively putting an end to Wells, Fargo and Co. as a transportation and delivery business. The following April, the banking headquarters was destroyed in a major earthquake, but the vaults remained intact and the bank’s business continued to grow. After two later mergers, the Wells Fargo Bank American Trust Company—shortened to the Wells Fargo Bank in 1962—became, and has remained, one of the biggest banking institutions in the United States.

Weekly Focus

“The dark does not destroy the light; it defines it. It is our fear of the dark that casts our joy into the shadows.”

Brené Brown, Author

”A good rule to remember for life is that when it comes to plastic surgery and sushi, never be attracted by a bargain.”

Graham Norton, Comedian

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Sources:

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