Download the 05.09.25 Dynamic Market Update for advisors’ use with clients

By Kostya Etus, CFA®, Chief Investment Officer, Dynamic Asset Management

Despite the volatility, the uncertainty, the headlines… The S&P 500 ended last week (as of May 2) with nine consecutive days of gains, the longest winning streak since 2004. Over this time, the market recovered everything it lost since April 2, when the sharp losses came after President Donald Trump announced a series of tariffs, referred to as “Liberation Day”. Given the rebound, the market was only down about 3% on the year through May 2.

It’s important to note that diversified portfolios continue to hold up well this year, particularly during bouts of heightened volatility, and key trends remain, including international markets outperforming domestic, value stocks outperforming growth, and income focused asset classes such as real estate and bonds beating stocks.

Aside from the market rebound, last week we received a slew of economic data to digest: 

1. Economy. U.S. gross domestic product (GDP) growth, the primary measure of economic growth, was reported as a contraction of an annualized 0.3% for the first quarter (following a very strong fourth quarter of a positive 2.4% growth rate). This is the first decline in growth since the first quarter 2022. There are several things attributable to the slowdown including slower, yet still positive, consumer spending as well as a significant drop in federal government spending amid efforts at the Department of Government Efficiency (DOGE). That said, the primary contributor to the negative print was an astounding jump in imports of more than 40% as companies and consumers sought to get ahead of tariffs. Thus, the contraction in GDP should not be viewed as an imminent sign of a recession, given the potential that the trend will reverse as imports stabilize. (GDP reported by the U.S. Bureau of Economic Analysis.)
2. Inflation. The personal consumption expenditures (PCE) price index, the Federal Reserve’s (Fed’s) preferred measure of inflation, posted a year-over-year gain of 2.3% in March. Despite being slightly above forecast, this is still the lowest reading in about six months. Additionally, Core PCE (which strips out the more volatile food and energy prices) came in as expected at 2.6%, the lowest level since early 2021. It is reassuring to see that inflation is maintaining its stable pace despite the tariff noise, particularly as we receive reports of tariff relief efforts as we begin to negotiate and reach deals with our trade partners. (PCE reported by the U.S. Bureau of Economic Analysis.)
3. Jobs. Non-farm payrolls, one of the primary measures of the labor market, came it at a healthy increase of 177,000 jobs for April, well above estimates. Meanwhile, the other key labor market gauge, the unemployment rate, held steady at 4.2%, as expected. This is yet another reassuring signal that there is no significant recession on the horizon and policy efforts (whether tariff or DOGE related), have not had a significant impact on overall U.S. productivity. (Labor data reported by the U.S. Bureau of Labor Statistics.)

This economic data was imperative ahead of the Fed meeting on May 6-7, as interest rate decisions tend to be heavily data dependent, according to Fed Chair Jerome Powell. While negative GDP growth and lower inflation are supportive of rate cuts, a resilient labor market would suggest the economy is not in peril. After weighing the variables, the Fed decided to keep rates where they are for now, as expected. And they may continue to hold until the tariff impact becomes clearer. Expectations remain to potentially see some rate cuts in the second half of the year.

Staying Invested Despite Negative News

No matter where we are with the market, there are always reasons to not invest. Often, it’s as easy to find a reason as opening your favorite news website and reading the first headline. Remember, bad news sells a lot better than good news. But regardless of what is happening in the news, how much impact does it really have on long-term market returns?

The chart below looks at specific years in history, every 10 years between 1975 and 2025, and highlights some reasons to not invest in those years. It then lists the market return that year, as well as an illustration of how an investment would grow if held to today. Let’s review the results:

1. There’s Always a Reason. There are a wide range of economic, environmental and geopolitical events on the list, including Stagflation, the Cold War and devastating Hurricane Katrina. Furthermore, each year lists three significant events, and perhaps many more are missing. You may think any one of these events could derail the market, and perhaps there may have been some short-term volatility, but annual returns tell a different story.
2. Do Markets Care? In all the years evaluated, the stock market ended the year in positive territory. In fact, three of the years posted more than 30% returns. While this is a small sample size, the point of the story is that these major events did not derail markets. The market is resilient and has a strong tendency to grow. If you got out of the market because of one of these events, or due to a market drop caused by the event, you may have missed out on significant upside on the rebound.
3. It’s a Long-Term Game. Looking at the right column, “Growth of $10,000,” you will notice the number gets exponentially larger further in history. The power of compounding cannot be overlooked, but it only works if you stay invested for the entire period. Shifting in and out of the market based on headlines can have a detrimental effect on long-term returns. It may be best to stay diversified and invested for the long-term to increase the chances of reaching your investment goals.

Stay diversified, my friends.

Market Performance Around Crisis Events
S&P 500 Total Returns During Specific Years Since 1975

Source: Hartford Funds publication: “There Are Always Reasons Not to Invest” (April 14, 2025). Past performance does not guarantee future results. *Assumes an initial investment of $10,000 in stocks beginning on January 1 of the year in column one through December 31, 2024, reinvestment of dividends and capital gains, and no taxes or transaction costs. Stocks are represented by the S&P 500 Index, which is a market capitalization-weighted price index composed of 500 widely held common stocks. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Data Sources: Morningstar and Hartford Funds, January 2025.

As always, Dynamic recommends staying balanced, diversified and invested. Despite short-term market pullbacks, it’s more important than ever to focus on the long-term, improving the chances for investors to reach their goals.

Should you need help navigating client concerns, don’t hesitate to reach out to Dynamic’s Asset Management team at (877) 257-3840, ext. 4 or investmentmanagement@dynamicadvisorsolutions.com.

Disclosures

This commentary is provided for informational and educational purposes only. The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. This is not intended to be used as a general guide to investing, or as a source of any specific recommendation, and it makes no implied or expressed recommendations concerning the manner in which clients’ accounts should or would be handled, as appropriate strategies depend on the client’s specific objectives.

This commentary is not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation. Investors should not assume that investments in any security, asset class, sector, market, or strategy discussed herein will be profitable and no representations are made that clients will be able to achieve a certain level of performance, or avoid loss.

All investments carry a certain risk and there is no assurance that an investment will provide positive performance over any period of time. Information obtained from third party resources are believed to be reliable but not guaranteed as to its accuracy or reliability. These materials do not purport to contain all the relevant information that investors may wish to consider in making investment decisions and is not intended to be a substitute for exercising independent judgment. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our control. Future results could differ materially and no assurance is given that these statements or assumptions are now or will prove to be accurate or complete in any way.

Past performance is not a guarantee or a reliable indicator of future results. Investing in the markets is subject to certain risks including market, interest rate, issuer, credit and inflation risk; investments may be worth more or less than the original cost when redeemed.

Investment advisory services are offered through Dynamic Advisor Solutions, LLC, dba Dynamic Wealth Advisors, an SEC registered investment advisor.