The Hidden Bias That Can Derail Your Financial Decisions
- Holzberg Wealth Management
- 24 hours ago
- 7 min read
HWM Market Recap - May 2025
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We've all had those mornings.
You hop in your car. You're on time, maybe even a little early. You've got your freshly brewed cup of coffee. Your favorite music or podcast is playing. Everything is smooth sailing. Then...
Red light. Then another. And another. There's more traffic than usual. More people are changing lanes and cutting each other off. Pretty soon, every intersection becomes a standoff between you and the universe, and it does everything in its power to make you late. Your perfect morning is unraveling.
Your stress builds. You don't notice that you're white knuckling the steering wheel, because you're too busy yelling "ARE YOU KIDDING ME?!" or "WHY IS THIS HAPPENING?!" You're so enraged that when you sip your coffee, you forget how hot it is, and it burns the roof of your mouth. By the time you arrive at your destination, your mood has soured. Your whole morning feels like a loss. You're convinced the city traffic grid has a personal vendetta against you.
Sound familiar? It certainly does to me.
But here's the thing... You probably don't remember the dozens of mornings you cruised through every green light without a single delay. Those days went smoothly. They were uneventful; forgettable, even. Because that's how our minds work. We fixate on the obstacles that slow us down. We notice the red lights, not the green ones.
Psychologists call this the 'headwinds vs. tailwinds asymmetry.' It's our tendency to focus more on the challenges in our path than the forces pushing us forward. Moreover, it's our mistaken belief that we face more obstacles than others or may experience more disadvantages than advantages.
And it doesn't just happen during our commute. It shows up in our financial life, too.
We can think of times in investing when markets act "normally" – they do what we expect them to do with reasonable returns over time – as tailwinds. We often take those periods for granted. They're seen as uneventful. No flashing sign that says, "Look at all the good that's happening!" It's just steady progress as your accounts quietly do their job.
But when volatility hits, like we've seen recently, everything feels louder. It feels like pundits on the news have megaphones. Headlines scream at us – DO SOMETHING! That creeping feeling of uncertainty sets in. You start to wonder: Should I be doing something different? These are the headwinds. They disproportionately occupy our attention and lead us to make reactive changes, like selling low or trying to time the market.
There's no question that the volatility we've seen so far this year is historic. The S&P 500 experienced one of the worst two-day declines on record of more than -10.5%. Shortly after that drop, the S&P 500 experienced one of its largest single-day gains of over +9.5%. These are events economists are going to be talking about for a long time. They also highlight a pattern we frequently see with large swings – they tend to cluster together; big up days are usually followed by big down days, and vice versa. We saw it in 1987 after Black Monday, and again throughout 2008 and 2009 during the Great Financial Crisis, and again throughout the pandemic in 2020.
As of this writing, the stock market has already regained its losses since that fateful two-day decline in early April. Will it continue to go up from here? That remains to be seen. However, following the previous nine worst two-day declines, the S&P 500 index averaged double-digit gains one year later.
Bank of America recently published a chart highlighting, over the past 14 years, what fund managers have identified as the biggest tail risk in the market. Tail risks are extreme events that could significantly impact gains or losses in an investment. Not surprisingly, the most popular answer today is that a trade war will trigger a recession. While this may be a significant risk, the chart does a fantastic job of visualizing why taking a long-term outlook is so important. Before this (aside from geopolitical risks, which more or less have always been present), the biggest risks included inflation and central banks raising interest rates; before that it was the coronavirus; before that it was the 2020 presidential election; before that it was the US-China trade war; before that it was monetary policy by the Fed, European Central Bank, and People's Bank of China; before that it was the disintegration of the European Union; and so on. When we look back on all these events and ones that go back even further, two conclusions emerge:
Many of those risks never materialized into much of anything.
Even those that amounted to something are now distant memories as the market marched onward despite the headwinds.
So what can we do when the noise gets loud?
Remember your tailwinds.
Your financial life is lifted by quiet, steady forces, like consistent savings, employer matches, dividends reinvested, and a globally diversified portfolio. These aren’t flashy. They don’t make the news. But over time, they matter far more than any single market swing.
Don’t let short-term headwinds blow you off course.
Market dips are uncomfortable, yes – but they’re normal. We expect them. Reacting to every bump can turn a temporary setback into a permanent mistake. This is why building your financial plan with these moments in mind is so important. Trust it.
Practice gratitude.
It sounds simple, but it works. Acknowledge the progress you’ve made – the good decisions, the milestones you've reached, and the goals you’re steadily working toward. It can help shift your focus from anxiety to perspective. Studies show that gratitude doesn't just help you feel good; it’s a proven tool for better decision-making and emotional resilience.
It helps to zoom out and take the long view in moments like this. We must always keep moving forward, no matter how many red lights we hit along the way.
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Monthly Changes in Indices
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Monthly Performance By Sector
| Year-to-Date Sector Performance
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Interest Rates: The Federal Open Market Committee (FOMC) held interest rates steady during its May meeting.
Inflation: The Consumer Price Index (CPI) increased 0.2% month-over-month in April, after falling 0.1% in March. Over the last twelve months, CPI increased 2.3%. Core CPI (which excludes food and energy) increased 0.2% in April compared to March and rose 2.8% compared to a year ago.
Housing: According to the National Association of Realtors, existing home sales decreased 5.9% in March and slowed 2.4% from one year ago. The median existing-home sales price rose 2.7% from March 2024 to $403,700 – the 21st consecutive month of year-over-year price increases. Sales of new single-family houses rose 7.4% in March from February and rose 6% from March 2024. The median sales price of new houses sold in March was $403,600.
Mortgage Rates: As of May 8th, 2025, the weekly average for a 30-year fixed-rate mortgage is 6.76%, slightly above the 52-week average of 6.71% and down 0.33% from a year ago.
Employment: According to the Bureau of Labor Statistics' Employment Situation Summary, unemployment was unchanged in April at 4.2%. Employment continued to trend up in health care, transportation and warehousing, financial activities, and social assistance.
Consumer Sentiment: The University of Michigan's Surveys of Consumers for April fell for the fourth straight month, plunging 8% from March. Compared to its reading from one year prior, consumer sentiment is down 32.4%. Year-ahead inflation expectations increased from 5% in March to 6.5% in April – the highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5% or more. Long-run inflation expectations increased from 4.1% in March to 4.4% in April.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Any charts and graphs provided are hypothetical and for illustrative purposes only, are not indicative of any investment, and assume reinvestment of income and no transaction costs or taxes.