May 2024 Newsletter
Welcome to the latest edition of our Insights.
Many headlines are painting a picture of “blood in the streets” following last Monday evening’s market action. In fact, the Nasdaq dropped 3.1%, the S&P 500 fell 1.5%, and the volatility index spiked 20%. In fact, markets have remained volatile throughout the week.
If you wish to discuss these topics, feel free to contact us.
All the best,
The Wealthy Me Team
Before diving into the details, we’d like to make one simple point: markets going down isn’t unusual. The unusual part has likely been what’s taken place the past few years.
It’s been more than a full calendar year since the S&P 500 experienced a correction—a decline of 10% or more. For context, since 1980, the S&P 500 has averaged an intra-year decline of 14%. In short, the US stock market has been outrunning the historical evidence.
Without risk, there can be no reward—the expectation should never be that markets go up in a straight line.
Now, let’s address the news event that unsettled the market:
Many are asking whether this AI selloff could spark a broader market correction. The reality is that no one knows for certain.
What I want to emphasise is this: the portfolios we build for our clients are not designed to outsmart the market in the short term. Instead, they are built to be durable through periods of volatility—like yesterday and whatever lies ahead—allowing you to capture the long-term returns that markets have historically provided.
Last Monday’s market activity offers a useful example. While the headlines tell a grim story, the results under the surface say something much different.
On Monday, while the S&P 500 declined 1.5%, 70% of the companies in the index—350 out of 500—posted gains. In fact, more than 80% of the stocks outperformed the index return that day.
Source: Morningstar Direct. Performance reflects the underlying data for all 500 stocks in the S&P 500 Index on Monday, January 27, 2025. Past performance no guarantee of future results. Indexes are not investable.
This highlights a concept we discuss often: diversification works.
Market performance has been highly concentrated in AI-related companies, but when unwinds occur, broad exposure—particularly to undervalued areas of the market and global diversification—helps provide protection against these shifts.
Stepping back, it’s important to remember that industries evolve through a process of “creative destruction.” Over the decades, we’ve seen this time and again—from Blackberry to Apple, Blockbuster to Netflix, or AOL to Google. AI is likely to experience similar leadership changes, and while we don’t know who the ultimate winners will be, we believe the diversified investment plan we’ve built for you is designed to weather these shifts.
We hope this letter provides clarity on how recent developments in AI are impacting the market. As always, we’ll be here with you on this journey, helping you make sense of what matters. If you have any questions or concerns, please don’t hesitate to reach out.
