Welcome to another episode of “Ethel’s Diamond Post.” The ongoing wildfires in the United States, particularly the fires in Southern California, have destroyed structures, caused widespread power outages, and significantly disrupted the economy. The destruction of homes and businesses has led to unemployment and decreased consumer spending, directly affecting the economy. This context is crucial to understanding the subsequent market conditions, as it sets the stage for the economic challenges we are currently facing. The wildfires have caused immediate damage, disrupted supply chains, increased insurance costs, and decreased consumer confidence, directly impacting market conditions. Some people will relocate, others will rebuild, and others are weighing their options. Such unforeseen circumstances weigh heavily on our hearts and minds, for we cannot imagine the stress and anxiety they must endure. We are acutely aware that many people are displaced due to the fire, often fleeing with only the clothes on their backs. Equally disturbing are the stock market pressures we face every day and the uncertainty streaming from the current administration. The ‘fire on Wall Street’ metaphor illustrates the intense market volatility and uncertainty we are experiencing.
The Dow Jones Industrial plunged 906 points, or 2.1%, in afternoon trading today. The other indices experienced a significant nosebleed: The S&P 500 fell 2.9%, and the Nasdaq dropped 4.2%. Last week was the stock market’s worst year in two years. While the firefighters and first responders were working hard to distinguish the fires in California, another fire was spreading on Wall Street. As a leading investment management firm, VZD CAPITAL MANAGEMENT LLC, with our deep expertise and experience, is at the forefront of understanding and navigating these market conditions. We leverage our knowledge and expertise to guide our clients through these turbulent times, not just reacting to the market but actively managing our client’s investments. Our team’s knowledge and dedication to our client’s financial well-being are unwavering, even in challenging market conditions. We are rotating from leading companies to companies that have lagged in the previous growth years and are ripe for the current economic conditions. The sweeping tariffs on Canada, Mexico, and China continue to give investors a continuous “whiplash,” for there is no sense of stability anytime soon. President Trump danced around the possibility of a future recession, the impact of downsizing the federal government across the board, the significant cost increase on groceries and automobiles, and causing consumers to lose faith and confidence in the current direction of the administration. The number one question on investors’ minds is what and when will the hemorrhaging stop. When can we take a moment to exhale before another fire starts?
The sharp downturn caught many people by surprise, but there was no crystal ball in attempting to time the market. Unfortunately, every day brings another tariff curveball. The markets are struggling to digest President Donald Trump’s trade policy. The move to give U.S. automakers a one-month reprieve from levies on Mexico and Canada complicates the economy’s unsettling firestorm. Each delay or change to a previous policy is causing the market’s response by increasing volatility. For instance, President Donald Trump announced that his administration would impose reciprocal tariffs on several countries starting April 2. This ‘back-and-forth’ drama makes planning and investing difficult for U.S. companies. Retailers like Walmart, Target, and Best Buy warned of price increases due to levies, but what about the significant increase in egg prices? What is the plan to reduce the cost of eggs and help the average consumer save money versus decreasing their disposable income? That is the million-dollar question, and everyone is waiting to hear a sustainable solution to combat the current uncertainty we are experiencing from the political firestorms.
At VZD CAPITAL MANAGEMENT, LLC, we are committed to proactively managing your investments, adjusting our strategies to minimize risk, and protecting your assets in these uncertain times. We have made substantial gains throughout the 2024 calendar year and did not wait until January to join the “panic selling” trend. We communicated to our clients advising that we were decreasing our exposure to equities and transitioning the growth strategy to a defensive posture to minimize volatility. This defensive posture involves investing in undervalued sectors like consumer staples, healthcare, utilities, energy, gold, and precious metals. These sectors are less susceptible to market fluctuations and provide a stable investment platform. While many would recommend “getting out” of the market entirely, regardless of what happens going forward, the right strategy can protect your assets from the erosion of inflation. Not all stocks will be suitable investments in times like these because companies with weak fundamentals that lack a competitive edge or questionable leadership will have a more challenging time recovering from periods of high volatility. Nobody knows what the stock market will look like for the next few weeks, months, or days; that uncertainty can be nerve-racking and heightened anxiety by the continuous news surrounding the state of the economy. However, we will continue to provide emails, newsletters, and other communication sources to ensure you understand the execution of our strategy and the impact it will have on the portfolios. Remember, we do not believe in a “one-size-fits-all” approach, for every client is different in terms of goals, age, standard of living, tax liabilities, and emotional risk level. There are many reasons to adopt a conservative stance, including buying gold, precious metals, and fixed-income instruments.
The growth-oriented environment delivered an impressive 24% return last year. At this writing, the Nasdaq is down 9.4%, close to correction territory. Due to the tariff drama, recession odds have been soaring this past week. As the head of President Trump’s new Department of Government Efficiency (DOGE), Elon Musk was responsible for the staggering number of federal workers fired, terminated, or laid off. It will increase unemployment, another layer of uncertainty to add to the Wall Street fire. Elon Musk has vowed to cut between $1 trillion and $2 trillion from the annual federal budget by 2026. In pursuit of this ambitious goal, Musk and his team have spent their first weeks waging war on the federal bureaucracy: canceling contracts, terminating leases, firing civil servants, blocking payments, and dismantling America’s top foreign aid agency.
Tt VZD CAPITAL MANAGEMENT, LLC, we are deeply committed to our clients’ economic health. As Wall Street’s first responders, we have skin in the game, for we are a fiduciary, fee-based, registered investment advisory firm. What does this mean for current and potential clients? Our compensation is based on putting our clients first. We are successful only if our clients are. We are dealing with high inflation rates, trade wars, and the potential bubble popping in artificial intelligence stocks. We utilize top dividend stocks for a recession to have the pricing power to pass through rising costs, low debt to protect from higher interest rates and essential products that generate steady cash flow in all environments. Top dividend players yield more than 3% or higher. Plus, they paid uninterrupted dividends for at least 20 years and outperformed the S&P 500 during the 2007-09 monetary crisis. Plus, if you factor in our asset allocation into fixed income, we are confident in our ability to protect and grow your investments over time. Our commitment to your financial health is unwavering, and we will continue to work tirelessly to ensure the best possible outcomes for your investments. With yields on savings accounts and money markets likely to decline, bonds may regain favor as an alternative for investors seeking higher returns. A balanced allocation in fixed income can provide a hedge against a declining stock market. Generally, bonds go up when the equity markets go down. However, we must consider the underlying instrument’s investment grade, the bond’s duration, and the current price levels.
On behalf of VZD CAPITAL MANAGEMENT, LLC, we sincerely thank you for your trust and confidence in us. Your support is invaluable, and we are committed to delivering the best possible outcomes for your investments. We are excited to announce that we are planning a client appreciation event in the summer. We look forward to sharing more details with you soon and hope to see you there. In the meantime, please remember, “This too shall pass.” We are here for you if you have any concerns or need reassurance. The market might be volatile and sprinkled with turbulence, but we are confident that we will land on a positive note. If you know others who would like a second opinion regarding their investments, we would welcome the opportunity to serve them, too.
With Gratitude,
Ethel, Nikisha, and Nathan
