The international trade conflict driven by President Trump’s tariffs has pushed the US stock market into a decline reminiscent of the early days of the coronavirus crisis. Although experiencing losses is uncomfortable, financial specialists suggest investors should think twice before divesting.
The S&P 500 ended the week down 9.1% following another decline on Friday. According to the New York Times, this marked the steepest weekly decrease since March 2020.
Investors had already taken out $25 billion from the market two weeks prior to Trump’s announcement of tariffs on Wednesday, the Times reported.
Typically, financial professionals recommend exercising patience during market upheavals. Historical data show that the S&P 500 has bounced back from past downturns, including the Great Financial Crisis, the DOT-COM Bubble, and the Covid crisis, according to the Associated Press.
While the timeline for recovery remains uncertain, experts advise investors to consider strategies for mitigating risk through diversification of their portfolios.
“It’s challenging to weather a hit when it seems like your portfolio is in turmoil,” said Brian Jacobson, chief economist at Annexwells Management, in a statement to the Associated Press. “However, these challenging moments will eventually pass. A variety of strategies that thoughtfully respond to changing situations can’t prevent challenges, but can mitigate the impact.”
Older investors and those in retirement may not have the luxury of waiting for a lengthy recovery. They might need to contemplate cutting back on expenditures or reallocating cash to more secure investments like money market funds and short-term Treasury securities, according to the New York Times.
However, experts caution that now may not be the best time to exit the market with the intention of re-entering later. This abrupt drop could be the least opportune moment for investors to act on their instincts, they argue.
“It’s risky for you unless you can predict what unfolds next in the political and economic landscape,” advised Meir Statman, a finance professor at Santa Clara University.
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