Market Volatility Is Back, Where Do We Go From Here?

The Market's Change of Character

The market seems to care less I’ve already written my blog for the month as it throws a fit whenever it pleases. Thursday, Nov. 20^th was one of the weakest days in the market I’ve seen this year. Excellent Nvidia earnings sent indexes up nearly 2% in early morning, only to finish down 1.5%.

It’s clear to me the market is changing its tune from the past six months. Instead of being a happy and easygoing 6-year-old child, it has grown into a stubborn, reluctant, and moody 8-year-old. Although the drawdown is still considered minor (down nearly 5% from the highs as of writing), we could end up pulling back some more.

As an investor, there are times to be offensive and times to be defensive. We should not use that as a reason to capitulate and throw ourselves overboard at the first sign of danger. Instead, let's continue to get a feel for the market tone, and position ourselves accordingly. Although offense is a lot more fun, defense wins championships. We must appreciate and pursue both to be a balanced investor.

Positively, the deeper and longer air is let out of the market, the better positioned we are for another enjoyable ride up. Throughout all the bumpiness we may encounter remember one truth, the market somehow, someway finds a way to recover. And once it recovers (after X number of months or years) it continues onto beautiful new highs.

No matter the politics. No matter the world situation. No matter why this time is different…pullbacks are temporary and the advance is permanent. Keep that somewhere in the back of your mind!

The Narrow Market (written 11/8/25)

As we wind down to the end of the year, I can imagine few would imagine how the market has moved year-to-date. We had a massive sell-off as the market responded to President Trump’s tariff threats, followed by one of the most orderly bull markets we could have asked for through September, into a period of market indecision now.

We find ourselves in a peculiar place. The market has been hitting fresh all-time highs, yet fewer companies are participating. That’s not something you usually want to see in a bull market.

So, how does this phenomenon of new market highs with less companies doing well happen? Really good earnings from HUGE companies. For example, Nvidia is the largest company in the S&P 500 with a market cap of nearly $5 trillion. The 11^th largest company in the S&P 500 is Warren Buffett’s Berkshire Hathaway at nearly $1 trillion.

That means, you could fit five Berkshires inside Nvidia. That is just mind boggling.

If you add up the top ten companies in the S&P 500 you’ll see they make up nearly 40% of the entire index. That means the other 490 (or so) companies make up the remaining 60%.

This is a double-edged sword. It’s great when those top companies are doing well, but not so great when they aren’t. That doesn’t mean the bull market is coming to an imminent end and we should all panic, but we should be aware of the near-term weakness the market is signaling.

Right now, the market believes in those top ten companies because they keep delivering the goods with solid earnings and outlooks. The market is less excited about the other 490 companies making up the index. Therefore, if the market changes its mind about the top ten companies anytime soon, there is very little excitement left for anyone else.

Per my usual refrain, predicting the market is foolish. Even the market does not know what it will do tomorrow. It simply takes all the data the world feeds into it and adjusts its price in real-time. All we can do is listen to it and try to hear what it’s saying.

In the meantime, we should be diligent and prepare for additional volatility until the market decides which way it wants to go. Either way, with our investments and plan we will be mentally prepared and ready for what comes next.

Why do my accounts not always match the direction of the S&P 500?

I’ve been getting this question a few times from clients as of late. Since most of you have been clients for many years, you’ve had most of your assets either in US bonds or US stocks. As mentioned in previous newsletters, this was a function of the US market’s relative outperformance of any other market.

As market conditions change, so do our allocations. Companies in Asia (figure 1) and Latin America (figure 2) have been looking attractive relative to the US. Growth oriented companies look good over value-oriented companies. And for most of this year, gold looked good compared to everything.

Given the recent shifts in relative strengths, expect your accounts to look less like the S&P 500 index. That means, good days in the US may not reflect as good days in your account. On the flip side, bad days in the US may not reflect as bad days.

Of course, this may change as the tides change in market conditions. If the US strengthens again, your account will once again move similarly to US markets. But for now, do not expect that to always be the case.

This doesn’t mean anything bad is happening in your account. I understand it can be disheartening to see the S&P 500 up and your account down on any given day. If everyone is having fun at the party, I know you’d like to have some fun too.

But, to be good investors, we must work to break ourselves from the chains of our expectations and our fears of missing out. If we can remain open-minded and flexible in our biases, things will continue to work out in our favor as they have for many years.

Figure 1: Asia (ex-Japan) up nearly 12% more than US in last 12-months. Source: stockcharts.com as of 11/11/25

Figure 2: Latin America up nearly 18% more than US over last 12-months. Source: stockcharts.com as of 11/11/25

RMDs and Capital Gains/Losses

As a reminder, if you have not taken your required minimum withdrawal this year it needs to be done by the end of the year.

Also, in December start looking where you stand from a capital gain/loss perspective. Some clients have significant gains this year. Do your best to take any unrealized losses where you can. This is not always possible, but it’s something I look into by year-end.

Happy Thanksgiving!

Please enjoy my favorite holiday of the year with your loved ones. Remember to express your gratuity for your life in as many ways as you can.

I am grateful for you and the work I’m allowed to do for you. You are the reason my family can be provided for, and I can’t thank you enough for that.

If you'd like to learn more about me and my services, you can book a free consultation with me at any time by clicking here.

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.