Hey everyone, this is Dave. Wanted to give you a quick update on what we've seen in the market so far here in Q1. I'm recording this right now on April 1st. So very, very timely. More importantly, I want to talk a little bit about how I am thinking about things going forward for this year. So I'm going to this practical. I'm going to this focused on what actually matters for your plan. Now, number one big picture. Definitely been a choppy start here, my friend. So far this year, the markets have been volatile.
As a matter of fact, just two days ago on March 30th, the S &P was down negative 9 % from its recent heights. And man, I was looking at my chops thinking, ooh, time to pull the trigger and get more aggressive. But it bounced back a few percent. And today, even more so, at least so far here on April 1st. So as of the end of Q1, stocks were down about 5 % from the height.
And this certainly tells you the story. This isn't some straight up line market right now. It's, guess you could best say a tug of war between optimism and uncertainty. And honestly, I'm expecting more of that same throughout this year. Now, one of the things that's happening under this service, which is really interesting, is sector rotation. If you look at what's...
led the market over the past few years, really, not just the past year, but the past 36 months, tech and financial stocks have really led the way. Well, guess what? This year, that ain't the case. As a matter of fact, there's a lot of movement out of those things and into other things, things that are value oriented, certainly things like energy with the price of oil going up. Telecom has been a bit of a surprise for this year and even
some other defensive positions. So I think this is actually a healthy sign. Markets don't go up forever on the handful of just a handful of stocks, you know, like our favorite tech friends. Rotation helps to broaden the participation, make diversification worth it, and over time can really have a much more stable foundation. But in the short term, of course, this is messy. This is leadership changing and not everything moves up all at once.
Now you've heard me do probably a few videos or talk to you about in reviews the January effect. The idea being that as January goes, so goes the year. And the idea being that if January starts out positively, particularly very positively, it could be a great year, slightly positive being an okay to good year, a negative year, a 50-50 shot of that happening. Well here at the end of January,
we were up a very tiny, tiny, tiny little smidge, 0.8%. So not even 1 % positive, very, very barely positive, kind of clinging onto the seat of your pants kind of positive. Usually, as I mentioned, a slightly positive January is a good sign. This one in particular was so close to flat, I just don't put much weight in it. And particularly in lieu of the fact we had really, really good 2023, 2024.
2025. I'm very not optimistic about the January effect being a good indicator for this year. Seasonal patterns, of course, are interesting. And it's something we do base some decisions off of, but they are one piece of the context and not the 100 % strategy. Now let's let's talk about the question that's probably on your mind. Are we headed for a bigger pullback?
We've already seen a drawdown of about 9 % here real recently, and we're sitting closer to 5 % right now. After the bounce, maybe 3 % by the end of the day today. So it wouldn't surprise me to see at all this volatility continues and we get a correction in that 10 to 15 % range. I mean, really, that's pretty normal for an awful lot of the years, and that's not a crisis. Could it lead to something bigger? Maybe.
but I think it's really just a part of how markets work, and particularly in a late stage bull market as we are in. Now on average, we get these kind of pullbacks fairly regularly, not every year, but it is a regular occurrence. And this is just the difference in how they can feel in the moment. Now as I zoom out, my expectation for 2026 is pretty straightforward. It's gonna be bumpy, it ain't gonna be smooth.
And if I had put a range on it, I would say there's a really good chance we end the year somewhere between slightly negative and slightly positive. So I don't think that the sky is falling. I don't think we need to get crazy conservative. But it's also not going to be a huge up year. It's not going to be a disaster. Just a grind, really. So this next part really is what matters most. What we're doing, not just what we're predicting.
My friends, should we see a correction in the 10 % to 15 % range? Let's lean into it. For our buy and hold portfolios, that means rebalancing, essentially taking things that have gotten higher and getting them a little lower, taking things that have gotten lower and get them a little bit higher, getting back to our standard asset allocation model, basically buying what's down and trimming what's up. Now for our timing or tactical kind of accounts.
we'll take a measured step up in risk should we get to that correction of negative 10 to negative 15 to take advantage of those lower prices. But I wanna be clear about something. We are not trying to pick that exact bottom. I don't know where it is. I don't know anyone that can consistently do that. So we're gonna scale it, meaning that if the markets dropped 10 to 15%, we're gonna get more aggressive. If they drop further, we're gonna get more aggressive again. On the other hand, if by some miracle,
the stock market ends up being double digits, we'll continue to trim to get more conservative. So that's our game plan. To give you a concrete example of what that could look like, if you are a moderate asset allocation, in our timing model, we're somewhere around 45 to 50 % in stocks right now, with the remainder being in bonds and cash and stuff like that. So if we get a meaningful pullback, meaning that that correction I was talking about,
we'll probably move to something like 55-45. If the markets go lower, meaning we get in the negative 20 to 25 % range for moderate type people, we'll get to 60-40 or maybe 65-35, depending upon what kind of bargains we're seeing out there. So we're doing this gradually, we're doing this intentionally, because we wanna take advantage of opportunities without over committing too early. So markets really like to test patience. They...
Test discipline. They should make you feel like you should be doing something dramatic. But historically, these are the environments where staying consistent, being opportunistic when others are fearful, tend to pay off. So these headlines are noisy, my friends, but our approach stays the same. Stay diversified, stay disciplined, and lean in when opportunities present themselves. As always, if you have questions about your specific situation,
you want to talk through your portfolio, just reach out. I'm totally happy to talk it through, walk it through with you. Appreciate you taking a few moments to watch this and of course, we'll keep you updated as things continue to evolve and change. Appreciate you, take care.