From Liberation Day to Market Whiplash

May 2025 Client Letter

In April the global economic landscape shifted—swiftly and dramatically. What began as a possible moment of optimism for the U.S., dubbed “Liberation Day” by some, quickly unraveled into the threat of a global trade war. This sudden turn deepened market uncertainty, leaving many investors feeling unsettled.

Not surprisingly, investor and business sentiment have been low. Writing for MarketScreener, analyst Tommy Douziech summed up the emotionally charged environment with this:

Richard Feynman, physicist of genius and iconoclastic thinker, once uttered this formula as elegant as it was powerful: “Imagine how much more difficult physics would be if electrons had feelings.” In one sentence, he pointed to one of the pillars of science: the predictability offered by immutable laws, applied to entities devoid of subjectivity. 

Now, if we transpose this reflection to the world of finance, one thing becomes obvious: financial markets, dominated by human investors, are anything but emotion-free. And it is precisely this humanity – between fear, euphoria, overconfidence and panic – that complicates the rational exercise of investing.

Portfolio Discipline Amid Headlines

For many investors, the emotional strain is intensified by a constant stream of financial headlines—some alarming, others contradictory. I’ve had clients call me after watching the news, worried about whether their portfolios need adjusting. My advice starts with a focus on what they own. Many maintain diversified portfolios with cash, bonds, precious metals, and equities. So far, this balance has proven its worth this year. While equity indexes like the S&P 500 and NASDAQ have swung wildly, the cash, bonds, and gold portions have acted as stabilizers.

Even within equities, results vary. In mid-April, tech giants like Apple, Broadcom, and Oracle saw sharp drops, rattled by trade fears and rising rates. Meanwhile, defensive stocks—AT&T, Coca-Cola, Southern Company—posted gains, buoyed by their steady dividends and lower volatility. This contrast illustrates the impact diversification can have on a portfolio. It’s not just about avoiding losses; it’s about having parts of your portfolio with the potential to thrive when others falter.

My second piece of advice is simple but critical: stay invested. From my perspective, time in the market beats timing the market. In April and May, that philosophy was tested—and rewarded.

Volatility Rewards Patience

Consider the S&P 500’s ride this year. On April 1, it closed at 5,633. By April 8, it had fallen over 10% to 4,982, a concerning decline. Yet by May 12, it climbed to 5,800—a 16% rebound in weeks. This rollercoaster isn’t new. In 2020, the S&P 500 plunged 34% during the COVID-19 panic, only to recover and hit new highs by year-end. Investors who sold at the bottom missed that upswing. The takeaway? Volatility is uncomfortable, but it often benefits those who wait it out. Knee-jerk reactions rarely pay off; patience often does.

Old School Companies, New School Tech

In today’s volatile environment, many investors have rediscovered the appeal of big, established, brand-name companies—firms with long histories and steady dividends. But many of these “old school” companies aren’t stuck in the past. They’re helping lead today’s digital and AI transformation.

Let’s look at four of them—Emerson, Honeywell, IBM, and Visa—and how they’re leveraging AI to drive innovation and deliver value.

Emerson: AI for Industrial Efficiency

Emerson Electric is integrating AI into industrial systems to boost efficiency and cut downtime. From predictive maintenance to AI-assisted workflows, Emerson helps industrial clients make smarter decisions faster. Their commitment to innovation is matched by a 68-year track record of increasing dividends.

Honeywell: Partnering with Google, Building with AI

Honeywell is applying AI to industrial operations and logistics, in part through a strategic partnership with Google Cloud. Their Forge platform and AI tools assist operators with real-time decision-making and automation. A 13-year streak of dividend increases adds to the appeal.

IBM: Enterprise AI for Everyday Use

IBM is embedding AI agents across its technology stack, giving enterprises access to smarter systems that can automate tasks and deliver insights through simple interfaces. With 28 consecutive years of dividend increases, IBM blends innovation with consistency.

Visa: Reinventing Commerce with Intelligent Payments

Visa is using AI to transform commerce. Their Visa Intelligent Commerce platform opens new possibilities for personalized, secure transactions, and supports developers building AI agents for payments. With 17 years of steady dividend payments, Visa remains a reliable performer.

The World’s Oldest Currency

Historically, gold’s value has risen during times of economic crises, inflation, and geopolitical instability. Its price first surpassed $500 per ounce in 1979 amid stagflation, an oil crisis, and the fallout of the collapse of the Bretton Woods system in 1971. It breached $1,000 in 2008 during the global financial crisis, $1,500 in 2011 during the European debt crisis, and $2,000 in 2020 during the COVID-19 pandemic, each time reflecting fears of currency devaluation and financial turmoil. More recently, it crossed $2,500 in August 2024 as geopolitical tensions and inflation resurfaced, leading to its current peak above $3,000.

For 5,000 years, gold has endured as a constant in economic systems, repeatedly dismissed as obsolete yet resurfacing as a reliable store of value when fiat systems falter. Central banks, once skeptical, are now stockpiling gold, due to various economic and geopolitical uncertainties. This shift underscores gold’s resilience, reclaiming its status not through fanfare but as a hedge in troublesome times. 

The Role of Bonds in a Diversified Portfolio

In recent years, the traditional 60/40 allocation of stocks and bonds has faced scrutiny, particularly during periods of rising interest rates when bond prices fell alongside stocks. However, I believe this scenario was more of an exception than the rule. Bonds have historically provided stability and income, and this year is no different.

Stability and Income

Bonds, including individual treasuries and corporate bonds, have added much-needed stability to portfolios in 2025. Despite the volatility in other asset classes, bonds have remained a reliable source of income and helped cushion portfolios against market swings. Today’s bond yields are more attractive than they have been in many years, especially following the financial crisis.

Historical Perspective

Looking back, the financial crisis of 2008 led to a prolonged period of low yields as central banks kept interest rates near zero to stimulate the economy. However, in our view, the recent normalization of interest rates has made bonds more attractive. For instance, the 10-year Treasury yield has been over 4% for much of the year. Treasuries can provide a solid foundation for income generation without taking on excessive risk. 

Diversification Benefits

Including bonds in your portfolio enhances diversification, spreading risk across different asset classes. This diversification can help reduce the impact of any single asset’s poor performance. Bonds’ low correlation with stocks means they can provide stability and reduce overall portfolio volatility.

The U.S. Economy Shows Resilience

Despite global uncertainty, the U.S. economy continues to show signs of strength. April’s jobs report beat expectations with 177,000 new positions. Unemployment held steady at 4.2%, and wage growth remained moderate—keeping inflation pressures in check.

Business investment rose 21.9%, driven by equipment purchases, and consumer demand stayed solid. Even with government spending falling and trade tensions rising, the private sector remains robust. Taken together, these signs appear to suggest that a near-term recession remains unlikely.

Staying Grounded Amid Uncertainty

Volatility is a natural part of the market, and headlines will always compete for your attention—sometimes with urgency, often with noise. But through it all, the core tenets of our investing strategy remain unchanged: have a diversified portfolio, stay invested for the long term, and maintain discipline. Incorporating dividend-paying stocks into a portfolio can also play a key role, as dividends provide steady income and, when reinvested, boost the compounding process, helping to build wealth over time.

Have a good month. As always, please call us at (800) 843-7273 if your financial situation has changed or if you have questions about your investment portfolio.

Warm regards, 

Matthew A. Young
President and Chief Executive Officer

P.S. We recently updated Part 2A and Part 2B of our Form ADV as part of our annual filing with the SEC. This document provides information about the qualifications and business practices of Richard C. Young & Co., Ltd. If you would like a free copy of the updated document, please contact us at (401) 849-2137 or email us at cstack@younginvestments.com. Since the document was last updated in March 2024 there have been no material changes.