By Gary Aiken | February 6, 2025
“Can’t you see this is the land of confusion? Now, this is the world we live in.” – Land of Confusion on the album Invisible Touch by Genesis
Phil Collins may have been prophetic, but we were at least similarly thoughtful in Part 2 of our 2025 Financial Forecast. We said two things that played out in January and early February. First, we said that headline risk was back, and its friend volatility would certainly be close behind. Second, we said that investors should expect a drawdown in U.S. stocks at high valuations and priced for perfection.
Watching every headline and reaction is somewhat maddening, especially now that we are officially in the Land of Confusion. Our strategy is to resist the urge to react in the moment and calmly evaluate the evidence as reality emerges from rumor. Let me illustrate.
On Sunday, January 27, the world was alerted to these facts: A Chinese hedge fund claimed that its Artificial Intelligence model could outperform the models built by large U.S. firms by a wide margin, it spent approximately $6 million, it used domestically produced Huawei semiconductors, and it had done all of this on its own and showed their “open source” code to the world. U.S. technology stocks plunged in the early morning of Monday, January 28. By that afternoon, and certainly within a few days, it was determined that while the platform showed new thinking, they had stolen data and algorithms from Meta and OpenAI, the cost of their operation was in the hundreds of millions of dollars and that they probably operated on 50,000 to 100,000 of the highest-end Nvidia chips.
A second example: On Saturday, February 1, rumblings started emerging from Washington that a 25% tariff on Canada and Mexico was imminent. The Trade War of 2025 was nigh. On Monday, February 3, before the market opened, President Trump announced that these tariffs would commence in two days. He was almost instantaneously met by defiant and retaliatory rhetoric from the leaders of Mexico and Canada. By lunchtime on the East Coast, our neighbors agreed to help secure the U.S. border and stop the flow of fentanyl in exchange for a 30-day delay to the tariff implementation. The market rebounded.
Drawdowns and Recoveries (S&P 500)

Sources: Bloomberg, L.P. and Concord Asset Management, LLC
These examples are the kind of headlines we said could lead to quick declines for high-priced stocks. While I pay close attention to the details, I also re-read what I wrote about our long-term thesis. When the market goes down 5% (and it does about once a year), I consider whether the assumptions underpinning my thesis have changed. If it has, then perhaps we’re due for a correction (about 10% down every other year) or a bear market (20% every 10 years or so). In those cases, it’s time for plan B. For now, we just listen to Genesis, we’re in the Land of Confusion, and “These are the hands we’re given, use them and let’s start trying…” to make wise investment decisions for 2025.
Author

Gary Aiken, Chief Investment Officer
Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.
Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.
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