Time is on Your Side
“Time is your friend; impulse is your enemy.”
—John C. Bogle
Growing up, one of my best friends lived in the house two doors down from mine. I met him in 1974, when I was four years old, and we spent much of our childhood years together. Little did I know, at the time, that his father, Jack Bogle, was in the process of founding and launching the Vanguard Group. I don’t see him very often anymore, as he lives in New York, but, when I do see him we pick right up where we left off. Coincidentally, I got to spend some time catching-up with him recently while tailgating before the Eagles vs. Giants game in Philadelphia. As I was thinking of topics to write about for this letter, seeing my old friend reminded me of his father’s well-known saying quoted above. When it comes to investing, it stands the test of time and it is also very prescient to the current market and economic environment in which we live.
As we all know, on April 2, 2025, President Trump declared “Liberation Day,” unveiling a sweeping set of tariffs that he framed as a bid to restore trade balance and economic independence. These tariffs, 10% on most imports and higher country-specific levies, triggered a cascade of analysis and predictions from economists, market strategists, and policy institutes. As we approach the end of the year, I think it makes sense to compare what professionals forecast would happen to the U.S. markets and economy following “Liberation Day” and what has actually occurred through October 2025.
Immediately following the announcement, analysts identified three principal risks: 1) inflationary pressure from higher import costs, 2) slower growth or potential recession due to trade retaliation and higher consumer prices, and 3) market volatility and equity declines amid uncertainty. The Washington Post and Financial Times highlighted that analysts compared the move to the 1930 Smoot-Hawley Tariff Act, estimating the average effective U.S. tariff rate could rise to 17%. (Washington Post, April 3, 2025; Financial Times, April 4, 2025). Moody’s Analytics’ Mark Zandi warned of “stagflationary” dynamics and a heightened risk of recession. CSIS and the Peterson Institute also projected up to a 1% increase in inflation and a decline in real GDP growth relative to baseline forecasts.
Following the “Liberation Day” announcement in early April, equities sold off sharply as investors priced in the new tariffs’ impact and volatility spiked. Tech and multinational stocks led the losses due to their global supply-chain exposure. Yet, by late April, partial policy pauses and diplomatic negotiations combined with other economic good news triggered a rebound. By late October 2025, major U.S. indices—the S&P 500, Dow Jones, and Nasdaq—had recovered and reached record highs. The forecasts of persistent market damage, therefore, have yet to materialize.
Real GDP grew at a 3.8% annual rate in Q2 and 2.4% in Q3 as consumer spending remained strong. The labor market cooled but remained resilient, with the unemployment rate averaging 4.3% through September (Chicago Fed nowcast; ADP private payroll data). Inflation rose slightly, with headline CPI at 3.0% year-over-year in September (Bureau of Labor Statistics, October 2025). These figures confirmed that inflation pressures were real, but moderate to date when compared to the “runaway” inflation some had predicted.
While predictions were, for the most part, accurate in direction, they diverged in scale. Analysts correctly foresaw a short-term equity selloff, import compression, and modest inflation. However, they overestimated the depth and duration of market weakness and the immediacy of a recession. By October 2025, the economy remained on a moderate-growth path, inflation although higher than the 2% rate targeted by the Federal Reserve remains near 3%, and markets had reached new highs.
The “Liberation Day” policy shock followed the classic pattern of initial market panic and gradual normalization. Professional forecasts successfully identified the key channels of risk, but overestimated their near-term magnitude. Through October 2025, the U.S. economy remains resilient, supported by consumer spending, corporate earnings, and expectations of Federal Reserve rate cuts. The long-term legacy of the tariffs—whether they lead to deglobalization, higher prices, or strategic reshoring—remains to be seen as does their long-term impact on financial markets.
One central lesson from the “Liberation Day” experience, and others like it, is that making investment decisions based solely on short-term predictions of market, economic or even political reactions is not a tactic PMA favors. While professional short-term forecasts may often identify plausible risks, extrapolating those risks into long-term market bets invites speculation as to the full set of adaptive responses that markets, policymakers, and consumers will make.
In April 2025, investors who sold equities in anticipation of prolonged market decline missed the subsequent recovery that lifted the S&P 500 and other indices to record highs by October. This reflects a long-observed principle: markets tend to overreact to new information in the short-term and mean-revert as uncertainty clarifies.
History shows that timing the market based on macroeconomic forecasts is extremely difficult. Even when analysts correctly anticipate direction—such as higher inflation or temporary volatility—they rarely predict magnitude or duration accurately enough to profit consistently.
Similarly, the global financial crisis of 2008–2009 and the COVID-19 downturn of 2020 demonstrate the same lesson: predictions of prolonged economic collapse often underestimate both market adaptability and policy response. In both crises, markets initially fell sharply but ultimately recovered, rewarding those who maintained their long-term positions and punishing those who attempted to time the rebound.
This, however, does not mean we do nothing with our portfolios as the world changes around us. As my colleague, Dan Berkowitz, covered in last month’s Partner Talk, PMA has made modest defensive adjustments to its asset allocation policy over the course of this year, consistent with our more conservative investment approach.
The most reliable precaution in our opinion against uncertainty is creating and maintaining a thoughtful and regularly updated financial plan, a diversified portfolio, and an asset allocation aligned with long-term goals and risk tolerance. PMA has been preaching this and helping clients effectively execute this belief for over 40 years.
Staying the course through painful volatility is not fun or easy to do, but, as is often the case, Jack Bogle put it best: “Time is your friend; impulse is your enemy.”
