Market Update: Understanding the Recent Selloff and What It Means for Investors

As of March 31, the U.S. stock market, represented by the S&P 500, is down about 5% for 2025 and nearly 10% since its peak on February 19. A 10% decline is what analysts refer to as a market “correction”, a relatively common occurrence. Since 1974, there have been 27 market corrections, with only six evolving into full-fledged bear markets (declines of 20% or more)*.

It’s also important to note that not all markets are experiencing losses. U.S. bonds and international stocks, for example, have posted gains this year. Just because the S&P 500 has dropped 10% from its high doesn’t mean a well-diversified portfolio has experienced the same decline.

With that context, let’s explore what’s driving the recent selloff and our recommendations for navigating it.

What’s Driving the Market Decline?

Several factors are contributing to the market’s downturn, including recession fears, inflation concerns, reduced government spending, and Federal Reserve policy. However, we believe the primary driver is uncertainty surrounding tariffs.

Beginning April 2, the U.S. plans to implement reciprocal tariffs on all trading partners. Under this policy, if a country imposes a tariff on U.S. goods, the U.S. will match that tariff on imports from that nation. Additional tariffs will also target specific countries—such as China—and certain products, including steel, aluminum, and vehicles.

It’s not necessarily the tariffs themselves causing market volatility, but rather the uncertainty surrounding their impact. Markets dislike uncertainty, and various potential outcomes could unfold:

• Other nations may reduce their tariffs, prompting the U.S. to do the same.
• Companies may shift manufacturing to domestic markets to bypass tariffs.
• Consumers may favor domestically produced goods.
• Prices could rise in response to tariffs—or they may not.

The goal of these tariffs is to promote fairer trade and encourage domestic manufacturing—objectives many would agree are positive. However, achieving these goals is complex, and the market may experience turbulence along the way. The good news? We expect greater clarity in the coming months, which should help stabilize markets and support a rebound in stocks.

Our Recommendations

As we always emphasize during market downturns: Stay calm, avoid overreacting, and stick to your plan.

For long-term investors, short-term volatility is a normal part of the market cycle. If you have years, or even decades, before you need to tap into your stock investments, this pullback should be of little concern and may even present a buying opportunity for ongoing contributions.

For investors with near-term income needs, your portfolio is designed to withstand these fluctuations. A portion of your investments is allocated to more stable assets, such as bonds or money market funds, which have appreciated this year. These assets serve as a buffer, providing income while allowing your stock investments time to recover.

When Will the Market Recover?

While further declines are possible in the short term, we believe the market will rebound from recent losses sooner rather than later. As tariff uncertainty subsides, markets should stabilize and resume their upward trajectory.

In the meantime, our guidance remains the same: stay the course and stick to your plan! 

*Source:  Charles Schwab

Authored by Stephen Blahovec and Michael Rausch of North River Wealth Advisors.  We are an independent, fee-only financial planning and investment management firm located in Pittsburgh, PA servicing clients locally and across the country.  To learn more, contact us here.

This content is developed by North River Wealth Advisors from sources believed to be providing accurate information. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.