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Financial Samurais,
We did it! We just experienced an official stock market correction—down 10% in just 16 trading days. It’s wild how we went from all-time highs on February 19 to widespread uncertainty and fears of another recession.
What makes this correction unique is that we closed lower for 16 straight days without a single close above the previous day’s high. As someone who always buys the dip, I couldn’t help but feel like a fool every day I did. But here’s the thing—it always feels uncomfortable to buy the dip. This time, it just felt even more painful due to the sheer number of consecutive down days.
Better Days Ahead?
In my humble opinion, if we can get through March, the worst may be behind us. Here’s why:
- March is historically weak for stocks, especially in the first year of a new presidency. Once investors adjust to a new administration’s policies, market reactions tend to become less severe. For example, if Trump announces his 30th tariff hike, it’s unlikely to spook investors as much as the first one did.
- Valuations have come down to more reasonable levels. The S&P 500’s forward P/E has dropped from 22x to 20x, which aligns with its five-year average.
- Sentiment is in the gutter—setting up a potential rebound. The latest University of Michigan consumer confidence survey shows pessimism is rampant, with inflation expectations rising to 3.9%. When expectations are this low, it’s easier for reality to beat them.
- Wall Street firms are lowering year-end targets. Goldman Sachs cut its S&P 500 target from 6,500 to 6,200, and Yardeni Research dropped its forecast from 7,000 to 6,400. However, earnings revisions haven’t come in yet, though they likely will.
Given all this, I’ve been putting a lot of money to work over the past three weeks—buying the S&P 500 and select beaten-down stocks—while still keeping a healthy cash reserve.
If you’re looking to deploy capital wisely, read my latest post: A Simple Three-Step Process to Investing A Lot of Money Wisely. These corrections are exactly what long-term investors wait for—just make sure you have a plan so you can act with conviction.
The Bright Side of a Recession
As a perma-optimist, I like to look for silver linings—even in a recession. After all, Financial Samurai was born from the depths of the 2008–2009 Global Financial Crisis. Without that painful period, I might never have had the courage to break free and pursue my dream of being a starving writer.
Unfortunately, it often takes trauma to spark change. Life’s inertia can keep us stuck in the same cycle for too long. But if hardship forces you to reassess and pivot, don’t waste the opportunity.
The odds of a recession in the next year have risen from 15% at the start of the year to anywhere between 25%–45%, depending on who you ask. That’s serious—but as an investor, you’d take 55%–75% odds of not having a recession any day. So, stay optimistic. Hopefully, the administration makes necessary adjustments, and the Fed steps in with rate cuts and quantitative easing if things get too rough.
Read more: The Positive Impact a Recession Can Have on Your Life.
How Much Is Serenity Worth?
Market corrections always remind me of the value of a diversified portfolio. After years of massive stock market gains, it’s easy to ignore underperforming asset classes—until times like these, when bonds and real estate suddenly feel like safe havens.
It’s interesting how my mindset has shifted over the years. Instead of chasing maximum returns with leverage in my 20s and 30s, I now focus more on capital preservation. When you feel like you have enough, the extra gains aren’t always worth the stress.
For example, by buying my home in late 2023 with cash, I missed out on additional stock market gains in early 2024. But I don’t regret it. Watching my wealth fluctuate wildly on a screen isn’t nearly as satisfying as enjoying the stability of owning my home outright.
I suspect that the older and wealthier you get, the more you’ll appreciate peace of mind. Read: A Paid-Off Home Is a Great Shield Against Fear and Uncertainty.
Final Thoughts
Let’s power through the final two weeks of March. If you’ve got cash on the sidelines, be ready to take advantage of any further dips. I believe 5,500 on the S&P 500 is the floor for this correction. But if I’m wrong, I’ll be aggressively buying the dip until my cash reserve runs dry, but not until another injection of cash flow arrives.
Thanks again to Fundrise for sponsoring this newsletter. If you're looking to diversify into residential and industrial real estate, as well as private growth companies—particularly in AI, Fundrise is worth a look. I've personally invested over $300,000 with Fundrise to broaden my portfolio and generate more passive income.
To Your Financial Freedom,
Sam
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