The first quarter of 2025 delivered a stark reminder of market unpredictability when major indexes plummeted about 20% in just three weeks, only to stage a remarkable recovery by mid-May. This sharp reversal left many investors questioning their strategies and reminded advisors just how critical it is to remain steady amid uncertainty.
As advisors navigating these turbulent waters alongside our clients, we’ve extracted critical lessons from this recent market drop and recovery that can strengthen investment approaches for years to come.
Below are the four key takeaways that can help you AND clients navigate uncertain market conditions.
1. Markets can rebound quickly without warning
Markets move constantly—up, down, and sideways. While volatility can feel unsettling, it’s a normal and expected part of investing. The key challenge for investors is staying focused on long-term goals without being derailed by short-term declines. What often surprises people is how quickly markets can bounce back. Some of the strongest up days in the market have occurred immediately after the worst ones.
Data from JPMorgan, shown in the chart below, reinforces this additional point: Even in years with strong overall gains, markets often experienced significant pullbacks along the way, with an average intraday year pullback of 14.1%.
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Investors saw this in real time when the S&P 500 dropped about 6% on April 4, only to surge 9.5% just five days later on April 9. This pattern isn’t unusual. According to Wells Fargo Investment Institute, an analysis of the 30 biggest daily gains and losses in the S&P 500 over the past three decades shows that major upswings and downturns frequently occur back-to-back.
These figures highlight the power of staying invested over time. Despite inevitable turbulence, the market has consistently recovered and moved higher in the long run.
Pro tip: Remind clients that volatility has always been part of stock market investing. While it’s tempting for them to react to headlines or policy changes, markets tend to price in new information quickly, and companies often adapt faster than expected. This is why focusing on business fundamentals rather than headlines usually serves you and your clients better. Help them turn off the news and stay focused on long-term goals.
2. Timing the market is virtually impossible
The old adage that “time in the market beats timing the market” continues to hold true. Timing the market means making two perfect calls: when to exit, and when to re-enter.
More likely, someone could get both moves wrong, and their portfolio will be the worse for wear. Especially as market timing has become exponentially more difficult over the past decade due to algorithmic and computerized trading. Markets now move with lightning speed, making perfect entry and exit timing nearly impossible for individual investors and advisors alike.
Consider this JPMorgan chart below, which illustrates how missing the market’s best days over the period from 2005–2024 has meant a surprisingly big hit. Just missing out on the S&P 500’s 10 best days over the past almost 20 years meant slashing returns almost in half compared to staying fully invested (6.1% versus 10.4%). Over the long term? That’s a heavy toll to pay.
As discussed above, the challenge is compounded by the fact that many of the best days in the market tend to follow the worst ones, meaning that investors who pull out after a downturn often miss the rebound. That unpredictability is exactly what makes market timing such a risky and unreliable strategy.
We saw this exact pattern play out during the Covid-19 market pullback in March 2020, when markets plunged 34% in just 23 trading days—only to rebound just as quickly. Many investors who sold in the panic missed the sharp recovery that followed almost immediately.
As the Wells Fargo chart below shows, some of the best and worst days in the market often happen in close succession. In fact, within just eight trading days between March 9 and March 18, 2020, three of the 30 best days and five of the 30 worst days occurred.
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The solution for advisors is to help clients create a liquidity bucket where cash and short-term securities can be deployed during pullbacks regardless of duration. This approach allows clients to take advantage of market dislocations without the pressure to time perfect entry points.
Pro tip: Focus on creating an all-weather portfolio with adequate liquidity reserves. Use historical data to reinforce the value of building portfolios designed to perform across a variety of market environments. Instead of reacting to short-term volatility, help clients stay grounded in a long-term strategy with sufficient cash reserves to weather any storm and capitalize on opportunities.
3. The advisor’s critical role during market volatility
Proactive, strategic client communication during market volatility is perhaps the most critical element of client retention and relationship deepening. It’s a priority at Carson Wealth and it’s a best practice for any advisor committed to building long-term trust.
In times like this, clients want to know what you are doing, how you are doing it, and how it all affects them. In what can be emotional investing periods like these, be sure to make it easy for clients to feel valued and connect with you. You can do this by:
- Client education: Providing historical context and perspective on market cycles. Our “Riding the Market Waves” webinar has been particularly effective, running just 20 minutes while delivering high-impact insights.
- Emotional support: Helping clients avoid making decisions out of fear that cause them to miss out on critical gains and goals.
- Strategic adjustments: Making tactical moves on the margins, such as rebalancing, hedging, or adjusting risk exposures without abandoning the core investment strategy.
- Regular communication: Maintaining consistent and close contact with clients to address concerns and reinforce the importance of staying the course.
Remember that the partnership between advisors and clients becomes most valuable precisely when markets are at their most unpredictable. Maintaining this perspective can help transform market disruptions from periods of anxiety into occasions for strengthening long-term financial positions.
Pro tip: Host webinars, seminars, and other events to connect with your clients on topics they care about. Send out weekly announcements and write relevant newsletters that address client concerns. During tough times, you act as a guide to keep clients on track for their long-term goals.
4. Maximizing tax planning opportunities in down markets
Market downturns open the door to meaningful tax planning. Beyond investment performance, strategic adjustments made during volatility can help clients improve long-term tax efficiency and wealth transfer outcomes.
Key strategies to consider include:
- Portfolio rebalancing: Consider rebalancing client portfolios by reducing overvalued positions and rotating toward areas designed for volatility protection, such as credit opportunities, special situations, hedged equity, and fixed income. Broadening diversification with international stocks or dividend equities can also strengthen resilience.
- Tax-loss trading: Review client portfolios for harvesting opportunities, especially in sectors experiencing significant volatility like technology. This strategy allows clients to offset capital gains while maintaining appropriate market exposure. Exercise caution regarding wash sale rules, which prohibit deducting losses on securities replaced within 30 days.
- Roth conversions: Frame this approach as “buying the dip” for retirement tax planning. Clients converting traditional IRA assets during market downturns receive a “double discount” paying taxes on temporarily reduced values while positioning for tax-free growth during recovery. Ideal candidates include those with substantial IRA balances, sufficient cash reserves for conversion taxes, and potentially higher retirement tax brackets. Don’t overlook backdoor Roth conversion opportunities.
- Gifting and trust strategies: Market downturns present an ideal window for wealth transfer planning. Consider gifting appreciated assets or funding trusts like Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs), or Intentionally Defective Grantor Trusts (IDGTs) while asset values are low to reduce estate tax exposure. Annual gift exclusions (currently $19,000 per recipient) also allow for tax-efficient transfers.
These strategies transform market challenges into tax efficiency and wealth preservation opportunities.
Pro tip: Don’t overlook the strategic timing of business valuations during market downturns. This can minimize taxable value and maximize potential transfer benefits for your clients’ estate planning strategies.
In today’s climate, staying invested and staying informed are more important than ever. Market volatility is inevitable, but how advisors and clients respond to it largely determines long-term investment success.
By applying these four lessons from recent market rebounds, advisors can help clients approach future market uncertainty with greater confidence and potentially turn periods of volatility into opportunities for long-term financial advantage.