The Indicator from Planet Money: “The Stock Market is Down, But You Don't Need to Be”

Release Date: March 12, 2025
Host: Waylon Wong and Darren Woods
Produced by NPR

In the March 12, 2025 episode of The Indicator from Planet Money, hosts Waylon Wong and Darren Woods delve into the recent downturn of the stock market, exploring the underlying causes, historical context, and strategies for investors to navigate through tumultuous times without succumbing to panic. Drawing on expert insights from investment researcher and advisor Dan Villalon, the episode offers a comprehensive analysis aimed at demystifying the complexities of the current economic landscape.

1. Setting the Scene: Current Market Turbulence

The episode opens with Darren Woods outlining the immediate factors contributing to the stock market's decline. He highlights the ongoing tariff uncertainties, government layoffs, and persistent high interest rates that are placing significant pressure on businesses.

Darren Woods [00:11]:
"Tariff uncertainty, government layoffs and sticky interest rates are weighing on businesses. Just yesterday on Truth Social, President Trump announced an extra 25% tariff on Canadian aluminum and steel."

This move by President Trump sparked a heated debate, with Ontario Premier Doug Ford expressing concerns about the detrimental effects of the trade war on both nations.

Dan Villalon [00:35]:
"This is, this is absolute chaos created by one person and that's Donald Trump."

Wong adds to the narrative by pointing out the broader economic implications, noting that the S&P 500 has plummeted approximately 10% from its February peak, fueling fears among Americans that this decline could escalate into a full-blown market crash.

Waylon Wong [00:41]:
"The stock market doesn't reflect the whole of the economy and it doesn't always hit everyone's savings, especially many low income Americans. But spills in the stock market do splash a lot of people."

2. The Impact on American Families

Darren emphasizes that despite the stock market downturn, it doesn't uniformly affect all aspects of the economy or every individual's savings. However, with three out of every five American families holding shares either directly or through retirement plans, fluctuations in the market inevitably impact a significant portion of the population.

Darren Woods [00:57]:
"Three out of every five American families own shares either directly or indirectly through retirement plans. So what are some ways these families could be navigating this moment?"

3. Expert Insights: “Don’t Panic”

Inviting investment expert Dan Villalon into the conversation, the hosts pivot to strategies for handling market volatility. Villalon's primary advice is succinct yet profound: "Don't panic."

Dan Villalon [01:25]:
"Don't panic would be sort of the first answer I would have."

Darren concurs, underscoring the necessity of maintaining composure in what he terms "a crisis."

Darren Woods [01:29]:
"It's a crisis. We can't afford to panic."

Waylon Wong further reinforces this sentiment with a cultural reference, likening the situation to the famous line from Toy Story.

Waylon Wong [01:32]:
"This is like that line from Toy Story when Woody says, 'The perfect time to panic.' This is also The Indicator from Planet Money."

4. Understanding Market Corrections

The discussion transitions to a more detailed examination of market corrections and their frequency. Dan Villalon provides a historical perspective, stating that stock market declines of 10% or more are relatively common events.

Dan Villalon [04:25]:
"If you look at the past 50 years for the US stock market, the US stock market has been among the strongest, if not the strongest, of most major markets. In the past 50 years, 27% of the time the market has been more than 10% off of its previous peak."

Darren contextualizes this statistic, reassuring listeners that a 10% drop is "pretty ordinary," occurring nearly one-third of the time.

Darren Woods [04:47]:
"So when the market is 10% down like it has been this week, that's pretty ordinary. It's the situation almost a third of the time."

5. The Importance of Timing and Long-Term Investing

Villalon delves into the concept of investment timing, a critical factor often misunderstood by investors. By analyzing data spanning five decades, Villalon demonstrates that the timing of market entry—whether during a peak or a trough—has minimal impact on the long-term growth of investments.

Dan Villalon [05:03]:
"Let's say you have a 10-year investment horizon and the question we asked is, okay, what happens if you started investing during the worst week to be an investor or the worst month or the worst quarter, the worst year. The good news is we found that whether or not you get unlucky with the start doesn't really tell you anything about the next nine years and 11 months and three weeks."

Darren adds a critical caveat to this optimistic outlook, reminding listeners that past performance does not guarantee future results and that market crashes with prolonged recoveries are possible.

Darren Woods [05:42]:
"These analyses are based on the past. The past doesn't guarantee the future. And of course, market crashes with slow recoveries do occur and are painful. And that's why a lot of Dan's advice is about long-term investing, like people saving for retirement far in the future."

6. Behavioral Economics: Myopic Loss Aversion

One of the episode's focal points is the psychological barrier known as "myopic loss aversion," a term Villalon introduces to explain why investors often react irrationally to short-term market fluctuations.

Dan Villalon [08:09]:
"Ignorance is bliss, myopic loss aversion. And if you haven't heard it before, congratulations. That means you're a normal human. But what the term means is when you look at losses over periods that are sort of too short, the result is that you get an investor overreacting to recent losses."

Waylon humorously responds to the term, clarifying its meaning and emphasizing the importance of a long-term perspective.

Waylon Wong [07:57]:
"I'm actually extremely nearsighted, but I don't think that's what he's referring to."

Darren Woods [08:01]:
"Well, hopefully you can be long-sighted in your investing though."

Waylon Wong [08:04]:
"Yes, yes. I'm not going to check my portfolio. I'll just obsessively check my Instagram likes instead."

Through these interactions, the hosts highlight the common human tendency to focus on immediate losses, which can lead to rash investment decisions. Villalon advises maintaining a distant view of one's investment horizon to mitigate such reactions.

7. Historical Trends and Market Resilience

Drawing parallels between sports and investing, Villalon uses the example of tennis champion Roger Federer to illustrate how success is often a result of consistent performance over time, despite short-term setbacks.

Dan Villalon [06:45]:
"An analogy that might be helpful is outside of investing altogether, it's tennis. Roger Federer, one of the greatest of all time, won about 82% of all the matches he ever played as a professional. But what about sort of the shorter term? What about the sets or the games or the points? I think this would shock a lot of people. Federer won 54% of all the points."

This analogy serves to reinforce the idea that short-term volatility does not necessarily dictate long-term outcomes.

Dan Villalon [07:11]:
"The short term, as painful as it could be, tends not to really tell you that much about what's going to happen over your entire horizon. And so that's why I feel some comfort in saying don't panic."

8. Diversification: Spreading the Risk

Toward the episode's conclusion, the conversation shifts to the importance of diversification in investment portfolios. Villalon succinctly encapsulates this strategy:

Dan Villalon [09:20]:
"Diversification is your friend."

Darren expands on this by challenging the notion of American exceptionalism—the belief that the U.S. market is inherently superior—and suggests that diversifying investments globally can mitigate risk.

Darren Woods [08:58]:
"Dan doesn't subscribe to the idea of so-called American exceptionalism. You know, the idea that the way that the US is set up it means that it's just destined to do better economically than the rest of the world. So to learn more about diversification, we have a whole episode on that and we'll link to it in the show."

9. Final Thoughts and Encouragement

In wrapping up, Wong reiterates the key takeaways, emphasizing that while the stock market experiences frequent downturns, these are part of a broader upward trend over time. He encourages listeners to maintain perspective and adhere to sound investment principles.

Waylon Wong [08:32]:
"Stock markets do go down by 10% or even more fairly frequently. Buying at the peak matters less than you might think for long-run savings. And we shouldn't let this obscure the bigger truth, which is that the stock markets as a whole have trended way up over time."

Darren adds a call to action, inviting listeners to explore further resources on diversification to enhance their investment strategies.

Conclusion

This episode of The Indicator from Planet Money serves as a timely guide for investors grappling with the anxiety of a declining stock market. By combining expert analysis, historical context, and behavioral insights, Wong and Woods provide a balanced perspective that encourages patience and strategic planning. The recurring message is clear: while market downturns are inevitable, maintaining a long-term view and adhering to diversification principles can help mitigate risks and foster sustained financial growth.

For those seeking to deepen their understanding of investment strategies and economic indicators, the episode suggests exploring additional resources and episodes focused on diversification and other key topics.

Notable Quotes:

• Dan Villalon [01:25]: "Don't panic would be sort of the first answer I would have."

• Waylon Wong [08:32]: "Stock markets do go down by 10% or even more fairly frequently... the stock markets as a whole have trended way up over time."

• Dan Villalon [09:20]: "Diversification is your friend."

Production Credits:
Produced by Cooper Katz McKim, engineered by Kwesi Lee, fact-checked by Tyler Jones, and edited by Kkannon. The Indicator is a production of NPR.