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  1. Home
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  3. June Newsletter to Clients

June Newsletter to Clients

Submitted by Moneywatch Advisors on July 15th, 2025

Enjoy this month’s edition that features an example of why we don’t time the market, a note about bonds and a reminder of retirement contributions.

I write quite often – and tell our clients – that we don’t try and time the market. What does that mean? We don’t sell or buy stock or bond funds because we think the market is headed up or down. Why? Because it’s impossible to predict the direction of the stock market. That doesn’t stop people from prognosticating, of course, but that doesn’t mean they know any more than anyone else.

The U.S. stock market’s performance this year has been a perfect example of how predicting its direction, at least in the short term, is so difficult. When the sweeping tariffs were announced on April 2 the market reacted with alarm and fear that a tariff war would hurt company earnings and spike inflation. The S&P 500 index of large, U.S. stocks dropped more than 18% from its 2025 high until its low on April 8. Investors clearly believed companies’ earnings in the future were not worth the price they were currently paying for those earnings.

What happened since the nadir on April 8 confirmed why we didn’t succumb to the group think and we stayed invested. Since that day the S&P 500 gained almost 18% through the end of May. (The index is up 1% on the year) Now, please understand, we didn’t predict the rebound either. We just know that markets are unpredictable and the best defense against market swings is to be invested in a range of assets so, hopefully, some zig when others zag. (Yes, those are technical terms)

In February I described the bond market as “the adult in the room” compared to the stock market. The bond market is primarily driven by professional investors who know what they’re doing and are driven by data rather than emotions. Recently, several clients have asked about the safety of bonds because of media reports questioning the bond market. For instance, Jamie Dimon, CEO of JP Morgan, has predicted a “crack in the bond market” because of the growing national debt. What he means is bond investors might have less appetite for U.S. Treasury debt, which would lower prices and raise yields. Higher yields cost the federal government more to borrow money.

I raise the issue to point out that the bond funds we invest in purchase many types of bonds, not just U.S. debt. For instance, one of the primary income funds that many of us own is Dodge & Cox Income fund (DODIX). This fund owns investment-grade corporate debt, securitized debt like bank loans and asset-backed securities in addition to some federal government bonds. So, when concerns are expressed over bonds, please remember that they are speaking of U.S. Treasuries, not necessarily the entire range of bonds available to investors.

Retirement contributions hit an all-time high in the first quarter, according to a survey by Fidelity. They found that 401(k)s hit a peak contribution rate of 14.3%, consisting of 9.5% personal and 4.8% from employers, and that is close to their recommended 15% savings rate.

While their numbers are positive, please remember one’s personal contributions should be based on your own individual circumstances, not a one-size-fits-all number. The IRS limit for contributing to 401(k)s and 403(b)s for 2025 is $23,500 and $31,000 for those over 50.

As always, consult with us for help determining how much to save in order to progress toward your goals.

 

Thank you for your continuing confidence.

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