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Many Americans exposed to U.S. stocks in their 401(k) plans may be disappointed to find their account balances declined in the first quarter of 2025. Investors experienced a rocky start to the year amid a sustained market retreat driven by rising fears that the current economic instability could morph into a full-blown recession.<\/p>\n
Concerns are growing that the spillover from the Trump administration’s policy disruption is taking a toll on markets and pushing equities to the brink.\u00a0<\/p>\n
Financial planners look ahead to offer expert advice and discuss how to hedge their bets amid a rapidly changing economic landscape.\u00a0<\/p>\n
The bears are roaring on Wall Street again as equity values trend lower. Many small business owners<\/a> have been spooked by the Trump administration’s recent wave of tariffs and government spending cuts. High inflation readings and weak consumer sentiment are adding to the pessimism. U.S. investors are feeling \u201cExtreme Fear\u201d according to CNN’s sentiment indicator.<\/a><\/p>\n The pain has been particularly acute for tech investors and technology professionals<\/a> with outsized exposure to company stock in their 401(k) plans, with Amazon, Nvidia, and Tesla all suffering double-digit year-to-date price losses. The Nasdaq finished March’s final week of trading hovering just above 17,000 points and has shaved off around 10% of its value for the first quarter so far.<\/p>\n Nonetheless, some advisors aren’t hitting the panic button yet.\u00a0<\/p>\n \u201cI think what we’re seeing is just a repricing, and a lot of this is overblown,\u201d says Ben Loughery, Founder of Lock Wealth Management<\/a>. \u201cWe typically get a correction of 10% roughly every 14-15 months anyway. Until I see credit spreads widen in the bond market, I think we are just seeing a reset now and will finish the year with modest returns.\u201d<\/p>\n \u201cAs we move off two record years of significant growth in the markets, seeing a pullback like we are experiencing is natural, as they typically happen at least once per year,\u201d says Lawrence D. Sprung, Founder at Mitlin Financial<\/a>. \u201cUse this time to get things in order so when markets shift, you are positioned for the next bull leg.\u201d<\/p>\n It could be a temporary twist in the market cycle or symptoms of something much more serious. There is no clear path out of the woods.<\/p>\n The Atlanta Federal Reserve’s GDPNow model<\/a>, which uses incoming data to estimate current-quarter GDP growth, has predicted that Q1 GDP may contract by around 2.8%. If this occurs, the economy will dip into recession territory. Analysts at Goldman Sachs now see a 35% chance of a U.S. recession, up from 20% previously, in lieu of Trump’s next wave of tariffs in early April.\u00a0<\/p>\n Some advisors, like Sprung, believe Washington policy uncertainty is responsible for the volatility.\u00a0<\/p>\n \u201cI don’t believe a recession is in the near future,\u201d he says. \u201cMarkets can deal with good and bad news, but they don’t like uncertainty, and recent weeks have seen uncertainty.\u201d<\/p>\n \u201cThis is not as a reason to panic but as an opportunity to reassess positioning,\u201d says Jason Gilbert, Managing Partner at Soundview Private Wealth<\/a>. \u201cClients should prepare by ensuring portfolios are not overly reliant on momentum-driven trades and by focusing on businesses with durable competitive advantages.\u201d<\/p>\n \u201cIf you’re feeling nervous enough to exit the market altogether, it may be a sign that you don’t have the right plan in place,\u201d says Arielle Tucker, Founder of\u00a0 Connected Financial Planning.<\/a> \u201cI encourage clients to revisit their strategy, remain diversified, bolster their emergency savings, and make incremental adjustments.\u201d<\/p>\n \u201cEquity sectors with stable cash flows, short-duration bonds, and inflation-hedging assets may be worth a look for risk-averse investors,\u201d she adds.<\/p>\n While clouds hang low over North America, investors are quickly rotating out of U.S. stocks. BofA’s latest Fund Manager Survey (FMS)<\/a> of 171 asset allocators, conducted between 7 and 13 March, revealed a 40% drop in U.S. equity allocations to a net 23% underweight \u2013 the lowest level since June 2023 and the steepest decline on record. The grass on the other side of the Atlantic pond is looking greener.<\/p>\n \u201cEuropean equities, for example, continue to trade at a significant discount to their US counterparts despite comparable earnings quality,\u201d says Cecil Staton, Founder of Arch Financial Planning<\/a>. \u201cRecent global monetary and fiscal policy shifts have created compelling opportunities beyond the U.S. market.\u201d<\/p>\n \u201cInternational stocks are still much cheaper than the S&P 500 relative to their historical averages,\u201d he says. \u201cIf investors don’t have this asset class as part of their plan, it’s not too late to adjust their allocation to add international stocks. \u201cWhile markets swing wildly, investors must recognize that periods of uncertainty also present opportunities. By reassessing their strategies, staying diversified, and focusing on long-term goals, investors can position themselves to weather the storms of 2025. The best course of action may be to remain calm, stick to a well-grounded plan designed with the help of an experienced financial advisor<\/a>, and stay vigilant as the landscape evolves.<\/p>\n<\/p><\/div>\n\nRecession Jitters<\/h2>\n
Internationalize<\/h2>\n