Yesterday, the S&P 500 experienced its worst sell-off of 2025, falling nearly 2%. This marks a 5% decline since its February 19th high. The question now is—was this a pivotal moment for the markets, or just another bump in the road?
At Avion Wealth, we believe in looking at the bigger picture. Let’s break down the fundamentals behind this recent market volatility.
Key Market Drivers
Economic Headwinds
Several macroeconomic factors are shaping the current market landscape:
- Manufacturing Slowdown: U.S. manufacturing is stalling, indicating potential economic weakness.
- Rising Prices: Inflation is hovering around 3%, keeping pressure on consumers and businesses.
- Tariff Uncertainty: Tariffs on Canada and Mexico appear to be moving forward, adding friction to trade.
For historical context, the U.S. economy thrives on free trade. Our 50-state free-trade zone has fueled the world’s most powerful economy. NAFTA further strengthened this by integrating Canada’s resources and Mexico’s labor, allowing the U.S. to maintain growth. However, with limited workforce expansion and resource constraints, protectionist policies could backfire.
Tech Sector Weakness
The once-dominant Magnificent Seven tech stocks are showing signs of fatigue. Artificial intelligence remains a revolutionary technology, but monetization challenges persist. How do companies turn AI into sustainable profits? That question remains unanswered.
Additionally, recent U.S. restrictions on exporting high-end chips, such as NVIDIA’s, have prompted China to develop alternatives like Deep Seek—a workaround that is now weighing on NVIDIA’s valuation. This is classic Economics 101: trade restrictions often drive innovation in unintended ways.
Rotation from Growth to Value
Market cycles are inevitable, and we’re currently witnessing a shift from high-growth stocks to value stocks. Historically, value stocks have performed well during these rotations. At Avion Wealth, we have always included a value component in our portfolios as a buffer against overheated growth equities.
Beyond domestic markets, non-U.S. investments are becoming increasingly attractive, and we are seeing these markets outperform. Global industrial slowdowns are also causing oil prices to drop, further emphasizing the interconnected nature of global markets.
What Should Investors Do?
At times like these, emotional reactions can be costly. Market timing is a fool’s errand, but recognizing relative valuation and diversification is critical. The key takeaway? Stick to your plan. Avoid greed and speculation. As the saying goes: “Bulls make money. Bears make money. Pigs get slaughtered.”
If you have questions about navigating this market, we’re here to help. Subscribe for more insights, share this with your network, and reach out to us with any concerns. Wishing you investment success.
Resources
Bloomberg: S&P 500 Sees Worst Selloff in 2025 as Bonds Climb: Markets Wrap
Paul is the founder and CEO of Avion Wealth, LLC. He leads a team of wealth managers in building and executing financial plans for high net worth individuals and families. Contact Avion Wealth to speak with a financial advisor.
