MW How novice investors have outperformed old pros in the volatile stock market

By Philip van Doorn

Also: stock picks outside the U.S., bond-market turmoil and when not to convert to a Roth IRA

The S&P 500 pulled back 2% during the first four trading sessions this week, but it was essentially flat for 2025 through May 22, with dividends reinvested. So some investors might still have been sighing with relief, considering that the large-cap U.S. benchmark had been down 15% for the year through April 8.

At that bottom there were warnings from professional money managers to cut risk ahead of potential economic disruptions from the tariffs President Donald Trump announced on April 2.

But maybe those veterans can learn a thing or two from decisions made by nonprofessionals in the stock market, as reported by Joseph Adinolfi and Gordon Gottsegen.

More from Joseph Adinolfi: This chart shows why investors should be worried about the latest bond-market selloff

More from Gordon Gottsegen: How young traders are getting rich betting on things like Rotten Tomatoes scores and the pope

And from the daily Need to Know column: This investor banks on Munger's advice to ride out volatility in markets and Tesla

An easy way to broaden your horizons

You have probably already heard that stock markets outside the U.S. have been performing well this year. But we might still be in an early phase of an expansion of investors' horizons. Non-U.S. stock indexes are still cheaply priced on a forward price-to-earnings basis when compared with the S&P 500 SPX. Here are forward P/E ratios for three exchange-traded funds that track broad indexes:

   Exchange-traded fund         Current forward P/E  10-year average forward P/E  Current valuation to 10-year average 
   SPDR S&P 500 ETF Trust                     21.08                        18.34                                  115% 
   iShares MSCI EAFE ETF                      14.74                        14.30                                  103% 
   SPDR MSCI ACWI ex-US ETF                   14.15                        13.59                                  104% 
                                                                                                       Source: FactSet 

The SPDR S&P 500 ETF Trust SPY holds all the stocks in the S&P 500 weighted by market capitalization. The iShares MSCI EAFE ETF EFA tracks the MSCI EAFE Index XX:990300, which is made up of companies based in developed economies outside the U.S. The SPDR MSCI ACWI ex-U.S. ETF CWI tracks the MSCI All Countries World x-USA Index XX:899901, which includes companies in developed and emerging markets outside the U.S.

From the current and average figures it is clear that there is nothing unusual about the international indexes trading lower than the large-cap U.S. benchmark on a forward P/E basis. But the S&P 500 is relatively expensive in relation to its 10-year average P/E, while the two international indexes are only slightly above their average P/E valuations. And that means they are cheaply priced if you are among investors who believe that non-U.S. indexes are positioned to outperform the S&P 500 for years to come.

The team at Thornburg Investment Management has a long record of investing outside the U.S. through the firm's International Equity Fund TGVAX TGVIX, which is rated five stars (the highest rating) by Morningstar. Thornburg head of equities Matt Burdett described a new lower-cost international ETF, explained how he selects stocks and provided examples from the new fund's portfolio during an interview with MarketWatch.

Bond-market worries and opportunities

Large institutional players in the bond market have made it clear that they are worried about U.S. fiscal policy. When bond prices fall, their market yields rise, and vice versa. Early on Friday, 10-year U.S. Treasury notes BX:TMUBMUSD10Y were yielding 4.51%, up from 4.21% at the end of March. Meanwhile the yield on 30-year Treasury bonds BX:TMUBMUSD30Y jumped to 5.04% from 4.58% at the end of March.

Joy Wiltermuth spoke with market strategists and money managers who outlined what can be done in Washington to counter the bond-market selloff and push long-term interest rates down.

More coverage of the bond market:

-- Bond 'vigilantes' are sending warnings globally. What does that mean for your portfolio?

-- These bonds can stand up to any inflation spike from budget battles and tax cuts

-- Strategist says 5% Treasury yields are a buying opportunity for bonds but a hazard for stocks

A satellite business competition has an uncertain outcome, but for investors there is a likely winner

Michael Brush dug into the details to explain the advantages and disadvantages of two competing satellite phone services. The winner of this customer-service war may not be the better of the two stocks for investors.

To convert or not to convert

A traditional individual retirement account, or an employer-sponsored retirement account such as a 401(k) or 403(b), is tax-deferred. This means contributions into those accounts aren't taxed, and the money in the account, along with interest or dividends earned and any capital gains, is also not taxed - until you begin making withdrawals. The withdrawals are taxed as regular income.

But with a Roth IRA or employer-sponsored Roth account, contributions are made with after-tax dollars. And then there are no further taxes, even when money is withdrawn.

If you have a traditional IRA or have rolled over an employer-sponsored account into an IRA, you can convert some or all of it into a Roth account to take the income-tax hit sooner rather than later. Various strategies can be employed to do this, including partial and repeat conversions.

In the Fix My Portfolio column, Beth Pinsker analyzed various Roth conversion scenarios and outlined four cases in which a Roth conversion wouldn't be worth doing.

Timing your application to begin receiving Social Security benefits

Take a look at your Social Security statement. It includes estimated monthly payments, which change each year based on various factors, including how much you continue to pay into the system. Your current estimates might show that if you don't claim benefits at the minimum age of 62, your payments will increase by amounts ranging between 7% and 9% for each year you wait until your benefits max out at the age of 70. If you wait until you are 70, the monthly payment might be 80% higher than it would be at age 62.

The information can help you to plan, and if you work with an investment adviser or financial planner, they can help you with a break-even analysis that takes many factors into account, including your spouse's age and income.

But what about the timing of your application to begin receiving Social Security benefits? In the Help Me Retire column, Alessandra Malito explained how long the application process would take and included tips on how to fill out the Social Security application in order to begin receiving payments precisely when you want them.

The Moneyist serves up fish sticks

Quentin Fottrell - the Moneyist - took on a reader's question about her daughter's boyfriend, an expensive salmon dinner, a surprise charge for a power-washing job and whether she should have refused to pay.

More from the Moneyist:

-- 'Is this a good tax strategy or a sham transaction?' My mother wants to give me her home. I have a plan to avoid taxes.

-- My brother's 'good daughter' siphoned $70,000 from her father's accounts. Should she still get an inheritance?

-- My husband used my money to renovate his house. Will I now get half of his property in a divorce?

A buyer's market for housing

Aarthi Swaminathan shed light on a major change for the U.S. housing market, including a big increase in the number of homes listed for sale, combined with the slowest April pace for the sale of existing homes since 2009. Here are the types of concessions that might help sellers move houses or help buyers afford them.

More housing-market coverage:

-- The surprising factor that's driving up home-foreclosure rates

-- Mortgage rates jump above 7% after Moody's downgrade of U.S. credit

Tech companies and tech stocks

Here is a sampling of coverage this week from MarketWatch's team of technology reporters:

-- Apple's stock falls as Trump makes a tariff threat on iPhones. Here's why it's misguided.

-- Snowflake's stock has been on fire, and earnings are fueling the rally further

-- CoreWeave's stock is up 200% in a month. Here's why it's so polarizing.

-- These 19 stocks at the intersection of AI and robotics could see big sales boosts

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-Philip van Doorn

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May 23, 2025 11:29 ET (15:29 GMT)

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