“Only when the tide goes out do you discover who’s been swimming naked.”
-Warren Buffett
Often viewed as a sage in the investment realm, Warren Buffett has a unique way of condensing the concept of risk in the marketplace. His wittiness not only captures our attention but also resonates deeply with the current landscape of today’s stock market and global economy. Simply put, when the market experiences a rapid decline, it highlights whether we’ve been carrying too much risk in our portfolios all along.
In the past two years, we’ve enjoyed above-average growth—something quite rare for the S&P 500, especially with back-to-back years of over 20% growth in 2023 and 2024. During such a booming market, it’s easy for investors to overlook risks or downplay the chances of an unexpected market dip. Yet, regular market pullbacks of 10% or more happen at least once a year, sometimes even more frequently. As of April 3, 2025, the S&P 500 has dipped roughly 12% from its closing value of 6163 on February 19, 2025. While corrections can feel a bit nerve-wracking, they’re quite common and often set the stage for sustained long-term growth in the stock market.
This particular correction has emerged alongside a flurry of headlines about tariffs and their potential impact on our economy, both at home and globally. We find ourselves in a time filled with uncertainty in the global marketplace, marked by growing geopolitical risks and unexpected changes affecting how the United States interacts with countries worldwide. However, let’s not forget that the US economy has demonstrated remarkable resilience throughout history. The stock market truly dislikes uncertainty, and once we gain clarity on the final tariffs after negotiations wrap up, businesses will adapt to stay competitive, allowing the stock market to start pricing in future growth once again.
For today’s investors, the key is to ensure you’re not “swimming naked.” If your risk target is in sync with your financial goals, your portfolio should be ready to handle all market conditions—be it rising or falling stocks. Although volatile markets can feel unsettling, they shouldn’t necessitate drastic changes if your portfolio is well-structured. If you’re uncertain or want to ensure your risk number aligns with your personal risk target, please let us know today!
-The Ridgeline Wealth Management Team