What The Wealth Retirement Podcast

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

• Jonathan Bednar II, CFP • Episode 103

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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

Speaker 1:

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:

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:

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:

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:

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:

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:

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:

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:

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:

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.

Speaker 1:

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.