We've Planned For This

Below is the text of an email I sent to all of my clients, professional contacts, and others who have requested to receive my messages, on the morning of April 7th, 2025, following the onset of a stock market panic which began at the end of the prior week. I've decided to publish it in lieu of what I had planned for today, as I believe the message it carries is relevant for all audiences at this time.

Friends,

I spent a large portion of the weekend trying to decide whether a note from me was necessary at the present time. If I sent a message of reassurance every time the market corrected, then you would never stop hearing from me. But after seeing the stock market futures project that the present panic would persist into today, I knew that the time had come for you all to hear from me. It’s an admittedly long message, but I feel that the intensity of the emotional climate around us needs to be matched with an equally intense, and clear, response.

Items that will not be addressed today (nor in any private conversations) are two-fold. First, I will not be providing my personal opinion on the Trump Administration’s trade policies. And second, I will not attempt to forecast how the market will behave in the coming days, weeks, months, years, or any other arbitrary and relatively short time-horizon of your choosing. Both matters have precisely zero relevance to the matters at hand because they remain hopelessly outside of our control. What we can control, however, is the same in this case as it is in almost every other part of life – our own behavior. And behavioral accountability is paramount in times where everyone around us insists that we should be panicking.

What’s Going On?

It’s no secret that the stock market has been… shall we say, “throwing a fit” over rapidly escalating concerns of a global trade war following the Trump Administration’s tariff announcements. Let’s begin with some perspective – where are we now, and how normal/abnormal is it? At the time I write this email, the stock market is coming off its 5th worst 2-day decline since 1950, tumbling -10.5% over Thursday and Friday of last week. Year-to-date, the stock market has declined almost -14% and is down about -17.5% from its all-time high in February of this year. The futures market suggest we will be down -20% or more at market-open today.

While the depth of this decline is so-far perfectly normal and should be expected over any given 12-month period (more on this below), the pace of the decline is not something that we’ve seen since the COVID-19 pandemic and in the Great Recession of 2008, before that. It bears emphasis that even if the market’s present panic plunges us into a correction that resembles these historic crises (a situation we are still very, very far from), it would not change a single word of my message below. Financial planning principles that have endured panics and crises of all sorts will not be broken by today’s flavor of catastrophism.

What Should We Do?

If You Are Not Retired

First, I will address those of you who are not retiring within five years, as your path forward is relatively simple – welcome this decline with open arms. If your plan and cash flow allow, then I would be buying as much as you can. If your plan does not allow for aggressive buying (beyond what you should all be doing in your employer’s retirement plans), then fear not – more declines (many more, in fact) will inevitably arise in the future. Just focus on what your plan dictates for now.

The most important thing for you all is this: choose not to panic (it is a choice, after all), keep a level-head, and recognize this downturn for what it is: an opportunity that will result in tremendous amounts of wealth for you and your family in the long-term if you allow it to. Internalize this experience and allow your emotions (which might at times become understandably fearful) to form callouses in your mind. The resulting toughness will serve you well in future declines.

I will leave you with this table from Charlie Bilello, published on X on April 5th. As mentioned above, the decline from Thursday and Friday of last week ranks as the 5th worst 2-day decline in the stock market since 1950, and the returns produced over the next one, three, and five years in related periods are illustrated below. I believe this table speaks for itself – do with it what you will.

If You Are Retired

If you are retired, or are within 5 years of retiring, then I’ll be offering some assurance in the form of four words which, if you’ve worked with me for even a short amount of time, should sound familiar: we’ve planned for this. 

At least once per meeting, I remind you that we know the market will fall in the future and that preparation for such times is essential to the success of your plan. In anticipation of an event precisely like the one we are entering, we’ve taken two defensive measures. The first is always keeping a hefty stash (five years’ worth of anticipated portfolio distributions, to be exact) of cash and short-term bonds which will fund your distributions when stocks are down. The second is our firm commitment to follow the Guardrails diagram that we review together in every meeting. These aspects of our plan are like tools that guide us through a dark night – the latter is a light that allows us to see just far enough ahead that we have a confident understanding of our surroundings, and the former is like a shield of armor that protects us from stumbling over anything the light fails to illuminate. As long as they are not abandoned in a moment of panic, they will maximize your likelihood of success.

If our plan dictates that you need to begin taking less from your portfolio (a temporary measure), then that is what we’ll do. If our plan assures us that your distribution levels are sustainable, then you may continue as you were. If a change is required to keep you on track, then you will hear from me, we will promptly make the change, and all will be well. Regardless of what camp you are in, I can’t recommend the following enough: turn off your television, spend time with your family, and do not spend one more second of your life fretting over this. You’ve done your hard work, you’ve planned wisely, and now is the time to enjoy your life. Watching your portfolio decline in value is never enjoyable, but it is nothing to worry about as long as it’s something you’ve accounted for.

Concluding Thoughts – A Message For Resilience

I’ll conclude with the following comments. Throughout the coming days, weeks, and perhaps even months, you will face an onslaught of attempted (key-word!) emotional abuse from a variety of pundits, many of whom will use the tapestry of impressive degrees, “experience” in financial markets, and eye glasses that make them seem more intelligent than they actually are (my favorite are the perfectly round ones) to mask their comparatively unimpressive grasp of economic theory and economic and financial history. The following is intended to serve as a refuge of rationality to ground you amid the neurotic whirlwind ahead.

Every single year, we expect the stock market to decline an average of 15%. We also prepare for a decline twice that steep to occur at least once every five years, and for a decline that consumes half of our portfolio once every twenty-or-so years. Our reward for patiently persisting through the frenzy has been quite worthwhile – a portfolio that has compounded at annualized rate of return of 10% for as long as reliable data is available (around 1800). These two entangled features of the stock market – persistently violent volatility and persistently enormous long-term returns - are what the once-great financial planner Nick Murray calls “The Package”. We all want the 10% annualized return, but we can’t get it without also accepting everything else that comes with it.

Choosing to accept The Package is exactly that – a choice, which harkens back to my message of behavioral accountability at the beginning of this email. If all that we really have control over in this life is our own decisions, then we can take a big sigh of relief in knowing that the solution to the panic at hand lies with us. The present downturn is just one iteration of countless crises that have occurred in the past and will again occur in the future. This is not surprising; we planned for it, after all.

I am of course available for any and all questions, comments, and concerns, and wish you all a wonderful week.

Best,

Zach Lopez

Does your advisor communicate with you during tumultuous times and let you know where you stand as it relates to present circumstances? If not, then a change is likely in order...