The Consumer Discretionary sector, it must be pointed out, is a special case. The sector is dominated by Amazon (AMZN) and Tesla (TSLA), which are down 12% and 43% respectively on a year to date basis (as of mid-day Monday 3/10/2025).
TSLA is having a particularly bad day today, down approximately 14%, as investors become acutely concerned about the impact of Elon Musk’s politics on the company’s customer base.
Where do we go from here?
Although we have avoided the largest mega cap tech stocks, we do hold several tech names across our portfolios, as well as other stocks linked to structural trends in tech, like the AI buildout.
Tech stocks have generally been very strong performers since the end of 2022. Valuations had potentially become stretched for many of them, which left them vulnerable to a reversal in market momentum, like we are seeing now.
While market dynamics have put tech stocks under pressure lately, we remain confident in the long-term outlook as AI reshapes the industry and the entire economy.
At the same time, the poor performance of tech so far this year serves as a reminder that investors should always take a diversified approach. It is tempting, but dangerous, to focus exclusively on what may appear to be the most exciting growth opportunities.
Opportunities outside of tech
One of the main priorities of the Trump administration is to deliver broad-based economic growth. Tariffs have the potential to favor many domestic industries by bringing industrial production back into the U.S.
Anticipated reductions in federal spending may increase the risk of slower economic growth—but are also helping bring down long-term interest rates.
Stocks across our Model Portfolios that tend to be more interest rate sensitive are benefiting from the downward movement in long-term rates. Yields on 10-year Treasuries are now just above 4.2%, down from a recent peak of approximately 4.8% in January.
Falling rates are welcome news for shareholders of certain housing-related stocks as well. Crushingly high mortgage rates have been the key obstacle to housing affordability and demand.
Managing through volatility
The stock market will always have periods of volatility. After a period of strong performance driven largely by the tech sector, we are now experiencing a pullback.
The Trump administration has made it clear that it is not going to have its policy agenda dictated by temporary swings in stock market sentiment—but there is no question that Trump’s economic agenda favors long-term growth and technological innovation.
In the face of some unsettling volatility, investors should as always try to maintain a long time horizon.