Stock market sales (2025)?

Sharp falls in major stock indices

This is the most common way we would continue to communicate regarding the recent stock market crashes caused by the tariff war initiated by Trump.

As we see in the image above, the Nasdaq 100 has fallen by nearly 20%, the S&P 500 by 15%, and the Stoxx Europe 600 by around 10%. This is the classic way a financial institution communicates, whether due to regulatory issues, prudence, or a combination of both.

During sales, everyone runs to buy… but when there are “sales” in the financial markets, many run away.

The answer lies in how we interpret the information.

This is what is known in behavioral economics as “framing”: the way a piece of news or data is presented can completely change our reaction, even if the actual event itself doesn’t change.

A 20% drop in the NASDAQ, a 15% drop in the S&P 500, or a 10% drop in the MSCI Europe is often described as a “crash” or a “crisis.” These headlines are a source of fear. But if we were to say that these markets are “discounted” or “on sale,” wouldn’t that change our perspective?

Imagine if this communication were possible. Wouldn’t we react differently?

It’s curious that we’re clear that when we need to buy an apartment, it’s better to do so when prices are low, when there’s a real estate crisis, and instead of buying, say, €4,000 per square meter, we buy it at €3,500.

Something similar happens in the stock market. Statistically, when the prices of financial assets fall, expectations of future returns rise.

You’re paying less for the same future benefits, so the entry point is better.

And yet, many people do just the opposite: they sell when prices fall, stop their contributions, freeze their decisions… when they should continue or, perhaps, even increase their investments, as we do with an apartment.

Why do we act this way? Why do we sell during stock market sales?

Because we’re human. Because our financial psychology is very weak, and loss aversion is deeply rooted in our behavior.

When clothing prices drop 20%, we buy.

When an index drops 20%, those who don’t understand what this is all about get scared and sell.

But what’s called framing (see note) also plays a role, changing everything.

“Collapse” sounds like fear.

“Discount” sounds like opportunity.

But it’s the same thing: lower prices.

Note on Framing

Framing is a behavioral economics concept described by Daniel Kahneman (Nobel Prize winner in Economics) and Amos Tversky. It refers to how the way information is presented influences people’s perceptions and decisions, even if the objective data remains unchanged.

For example, we don’t react the same way if we’re told a treatment has a 90% success rate as if we’re told it has a 10% failure rate, even if it’s exactly the same. The same thing happens in investing: saying “the market has fallen 20%” generates more fear than saying “it’s 20% cheaper.”

This cognitive bias can lead us to make irrational decisions if we don’t keep it in mind.

Reference:

Kahneman, D., & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica.

Panic isn’t an investment strategy. And stopping shouldn’t be an option.

EIn the stock markets, it’s impossible to make even the slightest advance. Therefore, it’s impossible to say “buy now,” as it’s the best opportunity you’ll ever have.

This is actually the same with sales!

There are the first sales, but if necessary, there are second sales, or sales are made for “everything for €10” or “2 for 1.”

There are even more incomprehensible things, but of course they are linked to what we’ve already discussed. There are some who stop their investment decisions during “sales.”

We’ve already said that we can’t officially announce sales in the financial sector. But we do dare to say that stopping investing is one of the worst options. Panic is not an investment strategy: when the price of the apartment we were looking for drops, we generally don’t stop.

And we know that investors who don’t stop are the ones who achieve their goals. In any case, recurring investments protect us from ourselves.

Stopping our investment when the indexes have fallen is like stopping buying an apartment when its price drops.

For contributions, when the market goes down, it’s like stopping running a marathon just as the downward slope begins.

Our investment portfolios are designed for the medium/long term, that is, 3 years or more (most for 10 years or more), so what happens in a month, or even a year, should be of very little importance, whether it’s a virus, tariffs, or any other malignant beast. If it’s a long recession, constant contributions help us buy more cheaply and lower our future acquisition costs. And if it’s the end of the world, our investments matter little.

During COVID-19, the world wasn’t prepared.

Today it is.

Tariffs, rising and falling interest rates, extravagant politicians… even wars are nothing new.

In fact, with tariffs, the speed of the declines (remember discounts) is similar, as seen in the graph above, to those of Covid-19. The question everyone will be asking is whether the markets have fallen too much, enough, or still too little. And no one can know. And neither we nor anyone else has any idea what the recovery will be like.

But we are sure that the world will overcome this again.

We don’t know if these are the first sales, or already the second, or if there will be third and fourth ones. We know that this unknown exists and no one can determine it. It is impossible to predict the minimum. It is also not very different for many products, especially fashion products; it is impossible to predict when the final sale will be, but that doesn’t mean we stop buying them at some point if we need them.

Probably when markets fall, there is a perception that they will be low forever, or that they will not stop falling, but that has never been the case. As Peter Lynch says, “I don’t know if the next 1,000 points of the Dow Jones will be up or down, but I’m sure the next 10,000 will be up.”

It’s a brilliant and simple way to remember that the short term is unpredictable, but the long term tends to reward patient investors, as markets rise more than they fall. And that, historically, has always worked.

A good recommendation is to focus on our objectives by activating our goal forecaster and concentrating on what we control the time and our contributions whether punctual or recurring, in the rest we can do little.

Investing is about continuing to believe in progress, even in times of doubt. The formula for winning in the stock market is not to play its game.