April Newsletter to Clients

Enjoy this month’s edition that features a review of the market so far in 2026, a reminder that market volatility can present opportunities and some advice from our friend, Warren Buffett. 

In February’s newsletter I wrote that the market had been “boring” so far during 2026. About two weeks later the Iran war started and the market started to bounce like an overloaded SUV on Lexington’s pothole-strewn streets. Well, I learned my lesson - that’s the last time I use the word boring in a newsletter. 

Despite the fact earnings for S&P 500 companies are projected to grow, the index declined 5.0% during March. When investors expect earnings to grow but prices drop anyway, their unwillingness to pay the same amount for more earnings can indicate an uneasiness with the market and of the economy in general. 

JPMorgan Chase CEO Jamie Dimon warned that inflation was the potential “skunk at the party” and could cause inflation to go up slowly as opposed to slowly going down. “This alone could cause interest rates to rise and asset prices (stocks) to drop,” he said. Inflation was a concern of many even before the war raised oil and gasoline prices. In fact, Dimon sees government debt and deficits around the globe as among the large risks that pose a threat to the market. Similarly, the International Monetary Fund said that, while there are too many possibilities to be able to predict forward accurately, “all roads lead to higher prices and slower growth.”

On the other hand, Dimon noted some positives. He named the Federal Reserve’s monthly purchases of Treasury bills, deregulation and the boom in capital spending on artificial intelligence as among the “tailwinds” that could support higher stock prices. In fact, the stock market has been remarkably resilient so far given all the geopolitical gyrations so far in 2026.

In the over four decades that Moneywatch Advisors has been advising individuals and families, we’ve seen market ups and market downs. One thing we’ve learned is that volatility can present opportunities. For instance, 

•    When stocks decline, it can be a great time to buy on sale. As we rebalance your portfolios to align with your specific timeline and needs, adding to stock mutual funds at lower prices is a great way to buy low before selling high one day;
•    In taxable accounts, selling some assets that have declined in value is a great way to offset gains and reduce capital gains taxes;
•    Leaning in to diversified investments can present opportunities. For instance, most of us own some real estate mutual funds in our portfolios and real estate can be a good diversifier as well as an effective hedge against inflation.

Although Warren Buffett has retired, he still has some advice for young investors that may have not ever experienced a market drop before. Here are his key points of advice:

•    Market corrections are normal. He noted that he has experienced drops of over 50% three times since taking over Berkshire Hathaway several decades ago; 
•    Drops of 10% or more happen, on average, every 16 months. Usually, the market bounces back quickly so most of us don’t even notice;
•    Missing the market’s 10 best days can drastically reduce long-term returns so stay invested;
•    Diversification helps weather volatility;
•    He recommends focusing on solid, long-term investments rather than speculative ones and to rebalance portfolios to include diverse sectors. Speculative investments are things like Bitcoin and private credit and equity.

Thank you for your continuing confidence.