With the historic amount of volatility in April, many are happy that month is behind us. A quick summary of the investment activity:

• The S&P 500 fell 10.6% over two days.

• It soon rebounded 9.5% — the third-best single day on record (!).

• U.S. stocks ended April down around ~1%. Quite the round trip.

On the trade front, tariffs are apparently postponed until July 8th. Right now, the market seems optimistic that those will not fully go into effect. I don’t see Trump walking away completely, but it feels like everyone is hoping that they’ll be minimized from the current plan. Perhaps we’re in a brief respite from the tariff-induced madness we just experienced, or perhaps the stock market is right, and the worst is behind us. Only time will tell.

It’s still early days in the China-US trade war, but the early data is worrying:

• China’s export orders have declined, and container ship bookings to the U.S. have dropped sharply.

• 👩‍🍼 Quick Tip: China produces a very large share of strollers, cribs, and toys sold in the America. If you or someone you know has a baby on the way, it’s smart to stock up on these essentials sooner rather than later.

• Businesses are pulling back on investment.

• Consumers are growing  anxious about unemployment, inflation, and general sentiment is low.

We’re also seeing an interesting trend with international investors: Foreign investors are on a “buyers’ strike” for U.S. assets, according to Deutsche Bank. This is showing up in a) the decline of the dollar, b) a sharp drop in overseas purchases of U.S. investments, and c) reduced international travel (at least from Europe) to the America. International attitudes toward the U.S. has declined, which is now showing up in the data.

As for interest rates, betting markets are pricing in two interest rate cuts this year. But it may be a tricky situation — tariffs are inflationary, so cutting rates in an inflationary environment is not the typical playbook. Plus, as we learned during the pandemic, rate cuts can’t fix broken supply chains, and may even add to inflation when goods are scarce.

In short: we’re a long way from calm waters. The stock market remains a strong early indicator of recovery, but right now, unpredictability is the only constant. To that point, around 40 companies have withdrawn or lowered their forward guidance for the year, citing economic uncertainty. Examples include General Motors, JetBlue, Kraft Heinz, and Logitech.

Please let me know if you have any questions or concerns about how your financial plan is being affected or how your portfolio is allocated.

Below I’ve summarized a few interesting data points from from the past month related to the summary above.

• 🫩 Nearly Flat – With all the volatility in April, the S&P 500 ended down 1%.

• 🌎 Country Returns – Going back to the start of 2025, the US is underperforming the international markets.

• 📈 Biggest 1-Day Gains – On April 9th the S&P 500 went up 9.5%.

• 🏠 Housing Inventory Up – The number of homes for sale across the U.S. is quite a bit higher than in recent years.

• 🇺🇸 State by State Inventory Growth – California in particular has seen a big increase in homes for sale.

• 🚢 GDP Down 0.3% in Q1 – GDP shrank 0.3% in the first quarter — the first drop in three years.

• 🛫 Europeans Traveling to America Less – Not a great sign for our tourism industry.

• 💵 US Dollar Down – The value of the dollar has declined ~8% since the start of this year.

• 👨‍💼 Job Worries – Many are concerned about losing their job. You have to go back to 2008 to see this level of fear.

• 💸 State Tax Changes since 2000 – An interesting look at how state taxes have changed since 2000. California has moved up quite a bit.

Quote of the Month

“Everybody in the world is a long-term investor until the market goes down.”

– Peter Lynch

As always, please reach out if you have any questions or would like to connect.

For many investors, index funds are the easiest and most effective ways to build long-term wealth. And for good reason — they offer:

1. Diversification. Index funds spread your money across hundreds, or even thousands, of companies, reducing the risk tied to any single stock.

2. Low Cost. Because index funds are passively managed, they typically have much lower fees than actively managed mutual funds.

3. Strong Performance. Index funds often outperform actively-managed funds, thanks in part to lower fees and consistent market exposure.

But what if you could get all those benefits, but with more control and additional tax benefits? That’s where direct indexing comes in.

You still get broad market exposure, but because you own each stock directly, it opens the door to some big benefits:

1. 🎯 Customization
If you would like to exclude companies or industries, that’s possible.

For instance, if you have pre-existing company stock, direct indexing can work around that holding — avoiding overlap or concentration risks, while still delivering broad market exposure.

2. 💰 Tax Efficiency
This is where direct indexing really shines. Even in years when the market goes up, many individual stocks decline:

Direct indexing allows you to sell those positions at a loss. We replace those positions with a similar company (e.g., selling MasterCard and replacing it with Visa), so the portfolio maintains a diversified profile.

The realized loss can then be used to offset gains from somewhere else, usually a highly-appreciated company stock. This strategy is called “tax loss harvesting,” and it helps improve your after-tax returns.

Is Direct Indexing Right for You?
Direct indexing is a good fit for those who meet the following criteria:

1. You’re in a high tax bracket.

2. You have large, unrealized gains (typically from a concentrated stock).

3. You have a sizable brokerage account ($500k+).

Frequently Asked Questions

1. How Much Does it Cost?
0.20% of the managed portfolio, per year. This fee goes to the portfolio administrator, not Think Different Financial Planning.

2. Does this work with stocks and bonds?
We only implement direct indexing for the for stock side of the portfolio.

3. Can this be done in a retirement account, like an IRA?
It can be implemented in a retirement account, but to get the full tax benefits, you would want to use this investment approach in an after-tax account, such as a brokerage, trust account, etc.

For many investors — especially those looking for a more personalized and tax-efficient way to invest — direct indexing is a compelling investment approach.

If you’re interested in learning more, please reach out.

This post will focus mostly on the current market volatility. Right now, investors are trying to make sense of a huge change to our trade policy.

Thursday and Friday’s trading sessions resulted in the 5th biggest 2-day decline for the S&P 500 on record, down 10.5%. Looking at the futures market, tomorrow looks like another big down day.

There has been extensive coverage on the immediate impact and potential outcomes. At this stage, I think it’s too early to determine how things will unfold, and what the short- and long-term effects will be.

My perspective (and hope) is that the tariffs are primarily a negotiating tool. Notably, just one day after announcing them, President Trump responded to a question about their negotiability by saying, “It depends. If somebody said that we’re going to give you something that’s so phenomenal, as long as they’re giving us something that’s good…the tariffs give us great power to negotiate.”(source)

• Discipline Funds – The author, Cullen Roche, is a brilliant economist. He’s anti-tariff, as most economists are, and point #2 from this blog explains why.

• Apricitias Economics – This was written right before the tariff announcement, but has a lot of great insight.

It’s times like these that remind us about the importance of diversification. We have to focus on what we can control: Our fees, our taxes, and – what’s highlighted most right now – our stock market risk.

The market has returned an average of 10% per year since 1928, despite an average intra-year decline of -16%. We’re at -17% right now. Unfortunately there is no upside without the occasional downside. It is the classic risk-reward tradeoff.

Things may get worse before they get better, but historically the biggest “up” days have clustered around the biggest “down” days.

Long-time clients know that I often refer to the 50% stock market decline that occurred in 2008-09. While I’m not predicting a repeat, Warren Buffett said it best: “Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market.” This is why most investors choose not to allocate 100% of their portfolios to stocks. And within individual stocks, the declines can be more extreme.

I completely understand the discomfort around the current market situation; It’s perfectly normal to feel uneasy. But it’s important to distinguish between discomfort and fear.

If you’re genuinely fearful, it’s probably a sign that your risk is too high. If that’s the case, please reach out.

What’s also an important tool is to rebalance your portfolio. That ensures that your portfolio remains inline with your risk profile.

The good news:

1. Bonds have acted as a ballast, performing well the past couple of days.

2. International stocks have outperformed US stocks since the start of the year. 

3. The tariff situation is self imposed. It is not a systemic shock, like Covid or the real estate crisis of 2008-09. They can be removed or reduced at a moment’s notice.

For further reading, I recommend the following article and advice:

• An Investor’s To-Do List for Chaotic Markets – Written by Christine Benz of Morningstar.

• Advice from Jason Zweig of The Wall Street Journal: “If you overhaul your entire portfolio in response [to what’s going on now], you aren’t just acting as if you know what the market is going to do next, which is close to impossible. You’re also acting as if you know what Donald Trump is going to do next—which is impossible.”

Below I’ve summarized a few interesting data points about the recent stock market decline, as well as some interesting points from the past month.

• 📉 Large 2-Day Declines – “The S&P 500 fell 10.5% over the last 2 trading days which was the 5th biggest 2-day decline since 1950.

• 🐻 Previous Bear Markets & Corrections – This chart illustrates that the long-term trend is up, but with many 10%+ declines along the way.

• ⑦ Magnificent 7 vs. S&P 500 – The Magnificent 7 are down ~15% since the start of the year (down close to 25% since this chart was created).

• 📊 A Bad Q1 Following an Election is Normal – From Ryan Detrick at Carson Research:

• 📈 The Best 15 Years On Record! – From 2010 – 2024, the S&P 500 has performed better than any other 15-year period going back to 1970, returning 12.2%. A remarkable run.

• 📉 IPOs at a Low – Since 2000, about 100 companies per year have gone public. Recently, we’ve been way below that. The recent volatility is likely to push more companies to wait it out for calmer times.

Real Estate

• 💵 Housing Prices During A Recession – An interesting look at nationwide home prices during recessions. Aside from 2008-09, they’re remarkably stable and positive.

• 🏡 Days on Market –  From The Wall Street Journal:

• ↕️ Year over Year Home Price Growth / Decline – San Jose leads the nation in home-price appreciation over the last year.

Apple

• 📱 Apple’s Growth & Valuation – I thought this was an interesting take on Apple from Scott Galloway.

Quote of the Month

“What you learn from history is that the market goes down. It goes down a lot.

The math is simple. There’s been 93 years this century. The market has had 50 declines of 10% or more…about once every two years, the market falls 10%…

…Of those 50 declines, 15 have been 25% or more. That’s known as a bear market…So every six years you’re going to have a 25% decline. That’s all you need to know. You need to know the market’s going to go down sometimes.”

– Peter Lynch, 1993

As always, please reach out if you have any questions or would like to connect.

The U.S. stock market is about 6% below its all-time high. Recent discussions around tariffs and their potential economic impact have sparked concern with quite a few clients, so I wanted to take a moment to share some perspective. 

Since tariffs are self imposed, their impact will hinge on their duration. A swift removal would likely result in a minimal impact, but if they remain in place for months, the negative repercussions (particularly for the auto sector) are likely to be significant.

While the recent stock market movement might be worrisome, it’s worth keeping in mind that the average intra-year decline for U.S. stocks is about 14%. We did not see that level of decline in 2023 or 2024, but that will not last forever.

Notably, large U.S. tech companies have experienced a sharper decline than the broader market. Here’s a snapshot of some of the biggest companies (as of 3/4/25):

• Tesla: Down 44%
• Nvidia: Down 24%
• Alphabet: Down 17%
• Microsoft: Down 17%
• Amazon: Down 16%
• Apple: Down 9%
• Meta: Down 13%

These fluctuations are a reminder of the inherent volatility of individual stocks, but they don’t necessarily signal a need to act. That said, your peace of mind is my top priority. If you’re feeling uncertain about your portfolio, or have questions about your broader financial plan, please don’t hesitate to reach out. I’d be happy to discuss your goals and how we’re tracking toward them. 

Below, I’ve also summarized a few interesting data points from the past month. Hope you enjoy.

• Many Anticipate a Stock Market Decline – Every week since 1987, the American Association of Individual Investors has surveyed investors on how they feel about the stock market. As of last week, bearish sentiment moved above 60% for just the sixth time in history. 

• Inflation Rising? – If I had to pick one area to worry about, it would be inflation.

 International Stocks Doing Well – Many international stock markets are outperforming the U.S., a reminder of the benefits of global diversification.

As a whole, from January 1st – February 28th, the US stock market is up 1.1%, whereas international stocks are up 5.6%. Some individual country market highlights below:

• • • Tech Taking Over – Big US tech companies have performed great for years. As a result, their weighting in the S&P 500 has moved above 30%, a level not seen since the late 90s.

• •  IPO Timeframe – The average time it takes for a company to go public has moved up over time, and is currently ~14 years.

Real Estate

•  Rent vs. Buy – If you’re comparing renting a home versus buying, this is a good calculator to help you run the numbers.

• Add Your Trust to Your Insurance – Following up on last month’s article about home owners insurance, another tip: If you have a trust, add it as the “additional insured” for your home owner’s and car insurance policies.

•  “U.S. Homes Sales in 2024 Fell to Lowest Level in Nearly 30 Years” – “U.S. existing-home sales fell in 2024 to the lowest level since 1995, the second straight year of anemic sales due to stubbornly high mortgage rates.” There were more homes sold in 2008 and 2009 than in 2024:

•  Not Many Homes For Sale – The number of homes for sale has been trending down for a while. This limited supply is certainly a factor in keep prices at all-time highs:

Life

•  Least Delayed Airlines – In case you’re booking flights any time soon:

Quote of the Month

“The key to making money in stocks is to not get scared out of them.”

– Peter Lynch

I hope you found these interesting.

As always, please reach out if you have any questions or would like to connect.

Right now many people are wondering how their home insurance would protect them in the event of a total loss.

Below is an overview for both homeowners and renters.

Homeowners Insurance

• Coverage A – Dwelling Coverage (each “coverage area” protects a different aspect of the property. They can be increased or decreased individually)

• • • Purpose. Covers the cost to rebuild your home in the event of a total loss (e.g., fire, etc.). For this reason, it is the most important part of your policy.

• • • Recommendation. 100% of your home’s replacement cost. To calculate this, multiply your home’s square footage by local, per-square-foot building costs.

• • • In the Bay Area it costs approximately $700 – $800 per square foot to build a new, mid-range home. So for a 2,500 square foot home, it would cost approximately $1,875,000 to replace (give or take quite a bit depending on how you rebuild).

• • • Additional Tips
      • Extended Replacement Cost comes into play when there is a covered, widespread disaster in your area. Recommended coverage is 20%-25% above the Coverage A amount.

• • • • • What’s typically not covered (check with your insurance to confirm):
          • • Earthquake damage (consider adding if in California)
            • Flood damage
            • Landslides
            • Sinkholes

• Coverage B – Other Structures

• • • Purpose. Insures detached structures on your property, such as sheds, fences, guest houses, swimming pools (in some cases), and detached garages.

• • • Recommendation. Many policies provide Coverage B at a percentage of the Coverage A amount, often 10 – 20%. Consider the unique setup of your home and increase or decrease accordingly.

• Coverage C – Personal Property

• • • Purpose. Covers your personal belongings, such as furniture, clothing, and other personal items.

• • • Recommendation. It of course depends on how valuable your personal belongings are, but many policies default to ~50% of your Coverage A amount. Estimate how much it would cost to fully replace everything in your home.

• • • Additional Tips
      • Your car is not considered personal property. So if your car is parked in your garage and destroyed in a natural disaster, it is not covered. Your car insurance would cover that damage.

• • • • • It’s a good idea to record a video of everything in your home about once a year. This is helpful for insurance claim purposes.

• Coverage D – Loss of Use

• • • Purpose. Covers the cost of temporary living arrangements if your home is uninhabitable.

• • • Recommendation. Consider how long it might take to rebuild your home, and how much it would cost per month to rent a home you’d be happy in. Some policies also have a time limit on how long you can receive this benefit, so that’s worth checking. The typical range is 20% – 50% of your Coverage A amount.

• Coverage E – Personal Liability

• • • Purpose. Protects you against legal liability for bodily injury or property damage that you may cause to others. This coverage kicks in when you are found legally responsible for an incident.

• • • Recommendation. $1,000,000 if you have a sizable net worth. $300,000 – $500,000 if not.
      • If you have a substantial net worth or just want extra protection, consider an umbrella policy. This provides additional liability coverage.

• Coverage F – Medical Payments to Others

• • • Purpose. Provides coverage for medical expenses incurred by guests who are injured on your property, regardless of fault. Examples include an ambulance rides and hospital stays.

• • • Recommendation. $1,000 per person, minimum.

• Personal Property

• • • Purpose. Covers your personal belongings, such as furniture, clothing, and electronics, against risks like fire, theft, vandalism, and certain natural disasters.

• • • Recommendation. Usually ranges from $10,000 to $100,000, depending on the policy and the value of your belongings. Consider the value of your belongings and increase or decrease accordingly.

• • • Additional Tip. Renters insurance can provide coverage on an “actual cash value” basis – which factors in depreciation – or a “replacement cost” basis – which covers the cost to replace items without depreciation. Replacement cost coverage is recommended, but typically has higher premiums.

• Additional Living Expenses (ALE)

• • • Purpose. Covers temporary housing. This can include costs for hotel stays, meals, and other near-term expenses following a disaster.

• • • Recommendation. Often set as a percentage of your personal property coverage limit (e.g., 20% to 30%).
      • ALE only covers temporary living expenses incurred as a result of the loss, not the cost of a new long-term rental.
      • Coverage usually applies for a limited time, often up to 12 months.

• Liability

• • • Purpose. Provides liability coverage if someone is injured in your rented home, or if you accidentally cause damage to someone else’s property.

• • • Recommendation. This is a personal preference. It often starts at $100,000 and maxes out at $500,000.

I hope you found this helpful.

As always, please reach out if you have any questions or would like to connect.

2024 was a great year for most investors, with the S&P 500 up 25%.

Fun Fact: Some of the worst-performing investments in 2024 were the “fancier” investments: Art (-16%), Fine Wine (-11%), and Diamonds (-20%).

But for those invested in more traditional assets – stocks, bonds, and real estate – most people are richer than ever.

In my experience, it’s during these good times when people become comfortable with risk. The US stock market just had its best consecutive years since 1997-98, and anecdotally I’m seeing a lot of “risk on” behavior.

I’m a long-term optimist for the stock market, but in the near term it’s impossible to predict. Recessions or economic shocks can occur out of left field, and we typically get in trouble when people don’t fear risk.

I recently read a memo from Howard Marks, who seems to share my cautionary stance. Below is a quote that resonated:

• “The three stages of the bull market:

1. The first stage usually comes on the heels of a market decline or crash that has left most investors licking their wounds and highly dispirited. At this point, only a few unusually insightful people are capable of imagining that there could be improvement ahead.

2. In the second stage, the economy, companies, and markets are doing well, and most people accept that improvement is actually taking place.

3. In the third stage, after a period in which the economic news has been great, companies have reported soaring earnings, and stocks have appreciated wildly, everyone concludes that things can only get better forever.“

It feels like we’re in the third stage. One example: A record-high share of investors think there is less than a 10% chance of a stock market crash. 

To be clear: I am not predicting a stock market crash, calling a top, or saying the market is in a bubble. I’m simply acknowledging that the past 2 years have been very good from a returns perspective, and I would not expect the next two years to be as good.

Michael Cembalest’s Eye on the Market from JPMorgan summarized this point well: “The S&P 500 just registered two 20%+ years in a row, something which occurred just ten times since 1871. Only during the 1990’s bull market and the Roaring Twenties [1920s, that is] did the good times continue for another two years. I expect a 10%-15% correction at some point in 2025…Plan accordingly: US equity markets should end the year higher than they began but be sure to have plenty of liquidity to take advantage of what might be a volatile year.”

In the Stock Market section below I’ll highlight a few reasons why we might see more muted returns this year or in the near future. I may be wrong (and I sort of hope I am, since it’s nicer when the stock market does well), but as the quote at the end of this newsletter says, you always need to be prepared for “horrifying short-term losses” if you invest in stocks.

Investing / Stock Market

• 📊 New President, Q1, Year 1 – “One of the worst quarters during the four-year Presidential Cycle starts tomorrow [01/01/25].”

• 📉 Lower Future Returns? – The S&P 500, which represents large stocks within the US, is highly valued. A 21.5 “forward price-to-earnings multiple” simply means that investors are willing to pay $21.50 for every $1 of expected earnings per share over the next 12 months. A high number indicates high growth expectations, which is exactly what’s happening in the AI space.

• 🔟 The Top 10 Companies are more Richly Valued – It’s important to point out that the top 10 largest stocks in the index (9 out of 10 being tech companies) are valued at much higher levels than the remaining 490 companies:

• 📉 Intra-Year Declines – While the S&P 500 has averaged a 7.9% annual return since 1928, the average intra-year decline (peak-to-trough drop) is 16%. 

• 🌎 Global Stock Returns – How many people predicted that Argentina and Israel would be the top performers in 2024?

Jobs

• 💻 California is Losing Tech Jobs – “Since the beginning of COVID, California has added a sum total of only 6k jobs in the tech industry—compared to roughly 570k across the rest of the United States.”

• 💰 For Public-Sector Workers, Increased Social Security Benefits – Great news for anyone with a pension from the public sector:

  “Police officers, firefighters, nurses, postal workers, public school teachers and government employees are among the nearly 3 million public sector workers affected by the provisions.”

  “Before Biden signed the bill, the Windfall Elimination Provision reduced Social Security for those who earned ‘non-covered’ pension income (which includes pensions from state and local governments, as well as non-U.S. employers) from their jobs, while the Government Pension Offset reduced spousal or survivor benefits when an individual’s pension is non-covered.”

Real Estate

• 🏠 Weekly Home Maintenance Email – WeeklyHomeCheck is a helpful resource that sends a once-per-week email about one simple home maintenance task. Their recommendation last week was particularly timely given the fires in Southern California:

  “Walk through your home and record everything. Having proof of all the items and details in your home would be crucial if anything were to happen, like a natural disaster.”

• 🔍 Homeowner’s Insurance Cost – Given the fires in Los Angeles, many are taking a second look at their homeowner’s insurance policy.

• 🚚 Moving Patterns – The states that had the biggest inflows last year:

Quote of the Month

“In order to capture the potentially higher returns that stocks can offer, you have to reconcile yourself to the certainty of horrifying short-term losses. If you can’t do that, you shouldn’t be in stocks—and shouldn’t feel any shame about it, either.”

– Jason Zweig

As always, please reach out if you have any questions or would like to connect.