Weathering the Storms: Long-Term Success Amid Market Volatility (103)

The recent sell-off in NVIDIA's stock highlights the fears surrounding market volatility. Past events quickly emphasizes the importance of maintaining a robust financial plan and understanding emotional market reactions.

On this episode:
• The emotional impact of market headlines 
• Significance of NVIDIA's decline in the context of market stability 
• Historical perspectives on market downturns and recoveries 
• The necessity of a diversified investment portfolio 
• Importance of financial planning in overcoming fears 
• Strategies to weather economic storms with confidence 

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Thanks for Listening! 

Jonathan

Transcript

Navigating Financial Market Volatility

Speaker 1 0:05

Welcome back to the what the Wealth Retirement Podcast . I'm your host , Jonathan Bednar , Certified Financial Planner . Today I want to talk a little bit about the markets this week and specifically I've been getting a lot of questions about the sell-off in the NASDAQ and the artificial intelligence names . Nvidia is kind of the one that got hit the worst , selling off by about 17% on Monday , the 27th . A lot of that came from kind of the fear of an artificial intelligence competitor one of NVIDIA's competitors that was announced over the weekend a Chinese company by the name of DeepSeek , and there's a lot of speculation around their ability to create this similar model with far less GPUs than OpenAI or some of the other big tech companies that they're spending for NVIDIA . So the fear came that if you can really do it cheaper , then maybe NVIDIA's earnings are going to get hit because people don't need to buy as many GPUs to create these artificial intelligence companies , these large language model companies , and so really that caused a lot of scare . What I want to say is that's a headline , that's a big headline . It did not go unnoticed . It would cause a lot of kind of fear and contagion and just kind of worry around what's going to happen . We had a lot of clients calling , and so what I want to do is just kind of talk about a couple of things regarding some of these big headlines that we see really often as investors , and then I want to share a couple of other tidbits about just how to think about your investing . You're investing .

Speaker 1 2:04

I saw a thing I can't remember if it was on LinkedIn or Twitter , but I saw a post that said the sell-off by NVIDIA on Monday , the 27th was around $600 billion sell-off . It was about 17% of the value . We saw a 17 percent decline . That sell-off is larger than the entire value of Exxon . It was larger than the entire value of Costco , and so when you think about that , when you think about the magnitude of the entire value of Costco of the entire value of Costco equivalent to basically going out of business from a multi-hundred-billion-dollar company all the way down to zero and for NVIDIA , the run that it's had over the last several years , it was only a 17% decline , but wiped out a very , very large portion of people's earnings not earnings but net worth , their investment returns and so it was a big deal .

Speaker 1 3:12

But I also want to talk about the other headlines . We see , you know , when we see these headlines , it can cause a lot of panic Let me just sell , Let me get out , and that's why you saw it drop the way it did . Just sell , Let me get out , and that's why you saw it drop the way it did . And I want to take you back in time to some other recent headlines that have happened over the last several years . The first one is COVID-19 . You all remember that pandemic triggered really an unprecedented stock market crash . We saw about a 30% I can't remember exactly , but around 30% decline in a matter of I don't know six to eight weeks . We saw Brexit referendum in 2016 , where this Brexit vote led to significant volatility in both European stocks and global markets as investors kind of grappled with the uncertainty of the UK leaving the European Union . We saw in 2018 , the US-China trade war escalating again , causing global market instability and not sure what's going to happen with a trade war . And then we've seen the Russia-Ukraine war that started in , I want to say , February of 2022 . We've seen the Israel and Hamas war , and then we've seen rising inflation over the last several years .

Speaker 1 4:37

But I'm going to pick another very specific topic headline that came out , and this came out in March of 2023 . And it was the Silicon Valley Bank collapse , where there was a run on the bank . The bank failed and ended up just causing widespread contagion around other banks . There's a couple other banks that failed and we were getting a lot of questions around that time around what's going to happen ? Are our investments safe ? Is the money at the bank safe ? Are we going to be okay ? And we are coming up on the two-year anniversary of that . That was March 10th of 2023 . So we're about I don't know six weeks away from that at this point in time , as much fear and contagion there was around that 10th of 2023 through January 31st of 2025 .

Speaker 1 6:03

It is really amazing that you can see these headlines and they're so fierce . They have such , you know , the teeth are strong , they bite right into our emotions , our fear , our portfolios , and they're tough . And having the mindset to , you know , make good financial decisions in some of those times is very , very difficult to do , and I think when we go back and we look at all of these other headlines I listed COVID , US trying to trade , war , the Brexit , Russia-Ukraine war the market is up since all of those happen and in all of those events , we have clients calling and not just us , other advisors too . And it's natural You're worried about what's going to happen if XYZ headline you know plays out over a longer period of time . What's going to happen if the bank fails ? What's going to happen if we have tariffs ? What's going to happen if we go to World War III ?

Speaker 1 7:13

All of these headlines are causing , really they drive emotions , and so what I want to do is just kind of take this time to show that if we are , if we have a really good , strong financial plan , then we've got , ideally , a really strong portfolio and that portfolio is designed to weather some of these storms . And we know we're not going to have perfect portfolios , the market fluctuates and goes up and down but it gives us the ability to stand firm in our financial plan and our investment portfolio , to know that at one point these headlines will become footnotes and those footnotes when you look back in time you can say I remember that . I remember when that happened , I remember when we . I remember that I remember when that happened . I remembered when we had this war , I remember when we had COVID . I remember when Silicon Valley Bank failed . And as times pass , the wound is healed , the portfolio is healed .

Speaker 1 8:25

And now our focus is on something else , and that gives us the resolve , knowing that those footnotes happen . That resolve , especially if you have a diversified portfolio . Now , if you had all your money in one stock , it might've been really painful , but for those of us that had a diversified portfolio and we know that these events happen , those footnotes give us resolve to know that we will be okay . You know the markets will continue . You know should continue to perform well . Obviously , I have no guarantee , so I want to make sure I say that , but if we use history as a guide , these portfolios should weather the storm very well .

Speaker 1 9:07

I also want to say that's why it's important to make sure you've got some dry powder , because we don't know how long these storms last , and so they may be very , very short , like COVID , where market dropped 30% in a matter of six to eight weeks and by the end of the year the market was up 17 or 18% , and then they could go and last a long period of time . If we think back to the financial crisis or maybe the tech bubble bust in the early 2000s , where it took two or three years to recover , and even then it was a slow grind . It just never felt you never felt comfortable that this was going to fully recover . You were waiting for the floor to fall back from out from under you Again . I just want to challenge you that , as you're working with a financial advisor and if you don't have one , we'd love to have a conversation and see how we could help have a financial plan and have an investment strategy that you can believe in and know that these are not just stocks , these are not just your investment portfolio . These are companies . These are real companies that Americans and people around the world invest in , buy goods and services from every day , and as they buy more goods and services , the earnings of those companies continue to go up , and as those earnings go up , the share prices go up .

Speaker 1 10:30

I just think it's important to have a really strong foundation in your investment portfolio so , as these headlines come up , you know that they shoot . They too will pass and turn into footnotes , and those footnotes give you the ability to say , look , I've weathered all these storms before , I think I can weather the storm as well and turn into footnotes . And those footnotes give you the ability to say , look , I've weathered all these storms before , I think I can weather this storm as well . That's my thoughts . I don't know what's gonna happen with NVIDIA . I don't know what's gonna happen with DeepSeek . I don't come on here to make any claims specifically for those .

Speaker 1 11:00

I do think it's important that you have a really good , strong strategy to your investment portfolio and if you need help with that , we're here to help you . If you're a current client and you know you want to have a conversation around what's recently happened in your portfolio and are you positioned well , then you know , reach out to the office . We , you know we'd love to sit down and talk to you and just review it . Be confident in your retirement . Have a wonderful day . Thanks for listening . Thanks for joining me on another episode of what the Wealth . If you enjoyed the episode today , smash that subscribe button . It helps me more than you think . Also , if you found this episode insightful and a light bulb went off , share it your friend , Aunt Judy , the random guy in the office who's always talking about investments .

Building Wealth Through Smart Choices

Speaker 1 11:45

Wealth isn't about just the chain . It's about our choices , chances and changing our financial futures . The information in this podcast is informational , in general in nature and does not take into consideration the listener's personal circumstances . This podcast does not intend to be a substitute for specific and financial , legal or tax advice . You should consult the approved qualified professional prior to making a final decision . Security is offered through LPL Financial member FINRA SIPC . Paradigm Wealth Partners is the other business name for Independent Advisor Alliance . Investment advice offered through Independent Advisor Alliance , a registered investment advisor . Independent Advisor Alliance and Paradigm Wealth Partners are separate entities for LPL Financial .