Market Update - Staying the Course Amid Volatility

The sharp sell-off in equities following President Trump’s tariff announcement caught many investors off guard—professionals and individuals alike. While a 10–15% correction is not unusual in any given year, last Thursday and Friday marked one of the steepest two-day declines since World War II. If losses continue into Monday, this could become the worst three-day stretch since 1987—worse even than any comparable period during COVID.

(For context on market corrections, here’s a helpful resource we’ve shared before.)

We’ll share a deeper view on policy developments in a separate note. For now, here’s what matters most:

1. Don’t Panic

The current turbulence is driven by uncertainty—primarily around escalating trade tensions. New tariffs introduce meaningful questions about global growth and supply chains, and markets are reacting accordingly.

While unsettling, this isn’t necessarily a signal to de-risk. As strategist Warren Pies notes:

• Non-recessionary corrections typically bottom out around 15–17% (equivalent to 5,100–5,200 on the S&P 500 today),

• Recessionary corrections tend to see a 25–27% drawdown (4,500–4,800 range).

We’re not calling a bottom. If tariffs are implemented and spark a cycle of retaliation, the risk of recession increases, and further downside is possible. But outcomes are not predetermined. Trade disputes, political negotiations, and central bank responses can all influence the trajectory from here.

Market history is full of examples where panic led investors to lock in losses—only to miss the recovery that followed.

2. We’ve Been Here Before

At Invariant, we’ve been navigating markets on behalf of clients since 2013. We’ve been through extreme episodes—COVID, the 2022 interest rate shock, the banking mini-crisis—and more than a few you’ve likely forgotten.

Market corrections are uncomfortable, but they’re also a normal part of long-term investing. Sometimes, we’re able to anticipate and reduce risk. Other times, we get caught in the same waves as everyone else. What matters most over time is discipline—the ability to stay invested through uncertainty.

3. Volatility Creates Opportunity

While major US stock markets were in 22-28% drawdowns at the time of this writing, balanced and diversified portfolios were down much less.

We expect to be more active in the weeks and months ahead. Volatile markets present chances to:

• Tax-loss harvest,

• Rebalance portfolios, and

• Put capital to work in attractively valued areas.

Portfolios remain concentrated in areas where we expect strong performance over the coming years. Our Profitability Alpha strategy and several core Strategic holdings are showing encouraging signs thus far. We will also be looking for opportunities to trade in this higher volatility environment.

Looking Ahead

We can’t control the headlines, but we can control our response. History shows that staying disciplined, avoiding emotional decisions, and maintaining a long-term focus is the best way to navigate turbulent markets.

As always, we’re here for you—whether you want to revisit your portfolio, update your financial plan, or just talk through what’s happening.

Thank you for your continued trust,

David M. Borowsky

Managing Partner

Director of Investments