Navigating Uncertainty and the Markets

Working in the financial services industry, one of the most common questions we get is: “what is the market

going to do?” We certainly wish we knew. However, we do not believe that trying to predict what the market will

do is the best way to serve our clients.

There are plenty of people out there already willing to make ‘predictions.’ Some are predicting that we are

heading for a recession. Others are predicting significant market gains.

Rather than attempting to predict the future, we look at the markets from a historical perspective. Observing

how the markets have performed in various conditions in the past can provide some insight into how they might

perform in the present.

As noted in our message from early April, we believe the excessive volatility encountered at the beginning of

the month was due to uncertainty surrounding tariffs. While the markets have recovered somewhat from the

precipitous drop, continued uncertainty or policy changes could impact returns.

Looking at the markets from a historical perspective, we believe that the US stock market is currently at a

valuation level that has proven problematic in the past. The chart below shows the P/E (Price/Earnings) ratio of

the S&P 500 dating back to 1996. It ended 2024 with a P/E ratio of 21.5x (and ended Q1 2025 at 20x). It is

worth noting that each of the major downturns in the markets during this century occurred when the S&P 500

P/E ratio was elevated. While valuation alone is not a perfect predictor, it does suggest that we may need to

lower our expectations of future returns on equity investments.

Regardless of any current headwinds, the fact remains that over any extended period of time stock market

returns tend to be positive. Since 1928, the S&P 500 has had a positive return on nearly 80% of all trading

days.

We will continue to monitor and evaluate market conditions and are prepared to make adjustments when

warranted.

At AP Denver, we continually focus on assisting our clients in creating financial plans to reach their goals.

Our investment process is designed to be emotion-free and to help you reach those financial goals. We stress

test our financial plans against various market conditions because we know that invariably we will encounter a

downturn or market volatility. Helping you invest in a diversified portfolio appropriate to your risk tolerance

greatly increases the likelihood of long-term success.

As always, if you have questions or concerns about your current financial situation and would like to discuss

them, please contact us to schedule an appointment.