How to Navigate Market Volatility During a Crisis

One of the most concerning developments is the growing divergence between professional and retail investors. Institutional investors have quietly reduced risk, shifting toward defensive sectors and fixed income, while retail traders continue chasing speculative trades. Sentiment surveys confirm this imbalance, showing extreme bullishness among small traders, especially in options markets. With these risks building under the surface, prudent investors should proactively protect their portfolios. No one can predict precisely when the market will correct, but the ingredients for a sharp downturn are clearly in place. Savvy investors should use this period of complacency to reduce risk exposure before the cycle turns. Here are six practical steps investors should consider: ▪️ Rebalancing portfolios to reduce overweight exposure to technology and speculative growth names. ▪️ Increasing cash allocations to provide flexibility during periods of volatility. ▪️ Rotating into more defensive sectors like healthcare, consumer staples, and utilities that tend to outperform during corrections. ▪️ Reducing exposure to leverage by avoiding margin debt and leveraged ETFs. ▪️ Using options prudently—not for gambling, but for protecting portfolios through longer-dated puts on broad market indexes. ▪️ Focusing on companies with strong balance sheets, stable earnings, and reasonable valuations. ▪️ The explosion of zero-day options trading is not a sign of a healthy market. It is a symptom of an unhealthy market increasingly driven by speculation rather than investment discipline. Retail traders have moved from investing to gambling, chasing fast profits while ignoring the mounting risks. Greed is rampant, leverage is extreme, and complacency is near record levels. Markets can remain irrational longer than expected, but history tells us these speculative periods always end in a painful correction. Bull markets do not die quietly; they end with euphoric retail excess followed by painful corrections. Investors who recognize the signs early will avoid the worst of the fallout and be positioned to capitalize when value opportunities return.

Sell When Others are Greedy... 🤑 ➡ Warren Buffett’s famous quote, “Be fearful when others are greedy, and greedy when others are fearful,” is a principle of contrarian investing. It suggests that successful investors should act opposite to the prevailing market sentiment. ➡ Here's how it relates to big moves in the market, both up and down: ➡ 1. "Be Greedy When Others Are Fearful" (Big Moves Down): This refers to times when markets experience sharp downturns, often due to fear, panic, or uncertainty (e.g., financial crises, recessions, or significant economic disruptions). In these periods, asset prices often drop significantly as investors rush to sell, sometimes irrationally. Fear and pessimism can drive prices below their intrinsic value. ➡ Buffett’s Advice: In times of widespread fear, you can find buying opportunities. Quality stocks and assets may be undervalued due to short-term panic. By purchasing during these dips, you stand to benefit from the eventual recovery when the market stabilizes, and prices rise again. Example: The 2008 financial crisis caused a major selloff in stocks, but those who invested during the lows ended up with significant returns over the next decade as the market recovered. ➡ 2. "Be Fearful When Others Are Greedy" (Big Moves Up): This part of the quote refers to times when markets experience sharp upward moves, often driven by optimism, speculation, and sometimes irrational exuberance. As prices climb, investors can become overly confident or greedy, pushing prices to unsustainable levels. ➡ Buffett’s Advice: During these times, it’s wise to be cautious and avoid getting swept up in the frenzy. When everyone is optimistic and prices are rising fast, they may become overvalued. This is the time to consider selling or at least proceed with caution, as these big upward moves may be followed by corrections or crashes. ➡ Example: The dot-com bubble of the late 1990s saw tech stocks rise to extreme valuations driven by speculation. When the bubble burst in 2000, many investors who had chased these inflated prices suffered heavy losses. ➡Buffett's quote underscores the importance of emotional discipline, encouraging investors to avoid herd mentality and focus on long-term value, rather than getting caught up in short-term sentiment.

Bad advice: “Markets are down, just ride it out.”   Better advice:  Don’t just ride it out – do something.   For the record, history shows that maintaining a long-term approach is one of the most effective strategies for navigating market volatility.   However, even if you’re a passive investor You can still be an active planner     Here’s what I’m focused on right now –   1. Harvesting Tax Losses   Realize losses on taxable investments to offset gains now or in the future.   It’s a smart way to create long-term tax advantages from short-term discomfort.   2. Rebalancing Portfolios   Use the downturn to buy low and restore portfolios to their target allocation.   It’s a disciplined way to manage risk and capture future upside.   3. Roth Conversions   Lower asset prices mean lower tax costs to convert traditional IRA dollars to Roth.   This can set up clients for years of tax-free growth.   4. Process and Reinvest RMDs   Required Minimum Distributions don’t stop during a downturn—but reinvesting them thoughtfully can keep that money working for the long haul.   This is an especially great time to distribute from IRAs inherited after 2020 and reinvest the proceeds.   5. Gifting to Kids and Grandkids   Down markets can be a great time for tax-efficient gifting.   Transferring assets when prices are lower can amplify the benefit to younger generations over time with less impact to lifetime exclusions.   6. Reaffirm Goals   Market volatility feels less scary when clients are reminded of their long-term plan, time horizon, and financial progress.   Recenter the conversation on purpose—not panic.   By focusing on what you can control, You turn uncertainty into opportunity And keep your plan moving forward, No matter what the markets are doing

Volatility is the price we pay for equity like returns over the long run. We've been in a melt up market for a while. That's not normal. Corrections are normal. At Willis Johnson & Associates, as market prices fall, we don't panic, we plan. The world seems scary, but we’ve got a plan in place. We are watching our client's accounts for opportunities to:   1️⃣ Rebalance—We've generally been trimming our overweight equity positions for the last few months (when the market was closer to highs). If we get a big enough drawdown, we’ll rebalance from bonds to underweight equities. 2️⃣ Tax Loss Harvest—We are already taking action to sell holdings that are taxable losses and buy similar positions, staying invested with the goal of saving our clients taxes. 3️⃣ Review Tax Strategies—Our advisory team is connecting with our clients to review whether it makes sense to accelerate tax strategies that could be beneficial in a down market, like Roth Conversions, Backdoor Roth IRA contributions, and funding Solo 401(k). 4️⃣ Getting Excess Cash to Work—We are likely not there yet, but for clients that have excess cash, there may shortly be a wonderful entry point into the market. We're reviewing their balancing sheets and having those conversations. Image Source: A Wealth of Common Sense

With market volatility surging, #recession talk is everywhere. If you’re checking your portfolio or retirement account, it’s easy to feel uneasy. But while economists aren’t calling a recession a certainty, the odds are climbing—estimates range from 20% to 50%.   So what should investors do? Stay strategic, not emotional.   ✅ Build Cash Reserves – A strong emergency fund is crucial in case of job loss. ✅ Pay Down Debt – Reducing liabilities now can ease financial strain later. ✅ Adopt a Defensive Investment Strategy – Consider diversifying into sectors like consumer staples and utilities, which tend to be more resilient. ✅ Ignore the Noise – Markets will react to policy swings, tariff news, and economic headlines, but basing your investment decisions on short-term speculation is a losing game.   Be long-term, be boring, and don’t panic. Successful investors focus on fundamentals, not fear.

Recent market volatility has many investors on edge, but it's crucial to look beyond the headlines. We believe: -Markets have overreacted to a handful of weaker data points, not a fundamental economic shift -Much of the selloff is driven by technical factors and systematic investors, not deteriorating fundamentals -Quality exposures remain key – companies with strong profitability may fair well amidst this uncertainty   Clients should consider: 1. Staying invested is important, consider quality stocks 2. Consider bonds for potentially improved portfolio diversification as correlations shift 3. Consider potential risk reduction, with buffered strategies, or defensive strategies such as allocations to utilities or minimum volatility   While volatility may persist short-term as narratives dominate, maintaining a long-term perspective is vital. Remember, challenging markets often create compelling opportunities for disciplined investors.  https://lnkd.in/d_j6bTyH

My portfolio was down more than $250,000 yesterday. Here is how I (and our clients) navigate the worst days in the market... First, some context.. What I do personally is the same thing I do for our clients. *Yes, we are long-term investors. *Yes, I believe in holding through market downturns. *No, I don't think "doing nothing" is optimal for clients. My three-step process 👇👇👇 1) Review War Chest My war chest is my cash or cash-like equivalent positions. My highest priority is peace of mind. This means ensuring I have cash. I typically hover around 1 year's worth of cash in my portfolio. The peace of mind far outweighs any additional return I miss out on. ***For many clients this week has meant deploying cash we had in our war chest into equities. 2) Review What Isn't Down While the "market" got crushed yesterday. Not every position I own has seen a massive downturn. These positions provide an opportunity to assess rebalancing into the things that are the most on sale. 3) Tax Loss Harvesting No one wants to "lose" money in the market, but tax loss harvesting is a great tool to set up a future tax asset. I sell my current position and buy an equivalent position. Staying invested while providing a tax benefit. - I believe in the power of long-term investing I also believe that human emotion requires more nuance than "buy & hold" At Moment Private Wealth, we aim to marry those two things to help our clients find a balance between investment theory and real life.