Who’s Driving Market Moves and How Should Investors React?
Matt Wilson, Chief Investment Officer and President of Keen Wealth, sure had a lot to work with when he put together his 2025 Q2 Market Update Webinar! It's been an eventful few months for the economy, and Matt delivered a clear analysis of everything from growth trends and interest rate expectations to the potential impacts of tariffs.
On today's show, we complete our Q2 outlook by discussing some of Matt's broader points and answering follow-up questions from webinar attendees.
1. "Is there any truth to rumors that China might sell off its holdings of U.S. treasury securities?"
Yes, in the sense that China has been selling its U.S. bonds since 2015.
No, in the sense that this "sell off" has been steady and orderly, and not the "fire sale" that many folks are worried about. In fact, China isn't even the largest holder of U.S. bonds anymore -- it's Japan.
There just isn't any real advantage to China ramping up its bond sales. Flooding the bond market would depreciate the value of the very investment they'd be trying to sell. And since the Chinese yuan is pegged to the dollar, selling U.S. bonds would make the yuan stronger, which would drive up the cost of Chinese goods in the U.S., diminishing a major competitive advantage.
2. "When markets are lower, is that a good time to do a Roth IRA conversion from a traditional IRA?"
Yes -- with the caveat that everyone's financial plan is unique, and you should never make moves without considering that overall plan.
As an example of how a conversion can be advantageous, let's say that inside your traditional IRA you own 100 shares of a company that are worth $100,000. Due to a market dip, those shares are now worth $80,000. Your advisor could help you roll all 100 of those shares from your traditional IRA into a Roth IRA, and you would only pay taxes on the $80,000. Assuming those shares rebound, the gain would be tax-free.
3. "Who is 'the market'? Who is actually making the moves that drive fluctuations in value?"
People. Everyone from your average investor with a 401(k) and a brokerage account to pros working at large financial institutions and managing funds.
Yes, computer analysis and AI do play a part in all that buying and selling. And some financial institutions do make scheduled trades throughout the year -- which they have to disclose. But ultimately market moves are a function of investors from all different walks of life trying to do what's best for their money or their clients’ money.
Folks who want a little more insight into the mechanizations of the markets might enjoy this conversation I had with my friend Joe Ratterman, the former CEO of BATS Global Markets. Joe spent his career creating systems that made trading more efficient, competitive, and transparent.
4. "What is your strategy to take advantage of market volatility?"
Again, with the caveat that everyone's financial plan is different, it's generally a good idea to look for devalued securities that are likely to rise in value once the markets rebound. The Roth IRA conversion described above is one example. Tax-loss harvesting to offset annual gains and lower your tax liability could be another option. Keen Wealth's comprehensive plans also have "guardrails" that we use to rebalance portfolios around things like our clients' risk tolerance and their specific financial needs in the short- and long-term.
You might be seeing much more "exciting" answers to this question on social media and the news. But market timing and "recession-proof" strategies that sound too good to be true almost always are. In my experience, the most successful investors learn how to cope with volatility and stick to their plans, with an advisor helping them make adjustments as needed.
5. "I'm a senior. Should I sell some of my investments to avoid further losses?"
First, some important context.
For all the uncertainty and worry that many investors have been experiencing this year, the markets are only down around 10%. In his webinar, Matt reminded folks that a 14% peak-to-trough dip is typical in a given year.
This current round of volatility is certainly significant, especially to retirees who are living off their investments. But it's not outside the normal range of market movements. And if you panic while the markets are in a normal downturn and sell, you're usually just locking in losses. Folks who have a comprehensive financial plan almost always have better options.
However, your time horizon as an investor does become an important factor during the later stages of retirement. Retirement spending can rise as you age and your health care needs increase. My team wouldn't manage money that a senior will spend in the next 3-5 years the same way we'd manage buckets set aside for 10-15 years down the road, or buckets that are earmarked for a legacy plan. It's these specific needs and goals that determine the real purpose of your money, and the specific strategies that Keen Wealth uses to personalize financial plans.
Thanks again to Matt Wilson for another excellent Market Update. If you have any further questions about the economy or your plan, or if you'd like to be notified when we've scheduled our next educational event, click here to get in touch.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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