Trump Tariffs: Cancel Your Retirement
One secret to great investing is to ignore the day-to-day noise; but with Trump tariffs now wrecking stocks, you may NEVER retire.
That’s how a lot of investors feel right now with the Nasdaq 100 (QQQ) down 13% in 3 weeks (that’s more than the entire stock market typically gains in a year!).
So now what?
Panic sell all your stocks? Cancel retirement and work forever?…
This is one of those volatile periods in the market where you are going to see braggarts coming out of the woodworks touting the success of their supposedly “safe” investment strategies (that have supposedly done just fine in recent weeks).
Take anything these braggarts say with a grain of salt. Here are 3 reasons why…
Reason 1: Volatility is the price you often pay for the best long-term returns.
Here is a look at the performance of the US stock market, as measured by the benchmark S&P 500 index (VOO) over the last decade, and compared to popular international stocks (VXUS) and bonds (BND) (BNDX).
You can see the terrible performance of US stocks (the purple line) in recent weeks, but you should also notice the terrific performance of US stocks over the last decade. They have been more volatile than international stocks and bonds over the decade (i.e. that’s the price you often pay), but US stocks have performed dramatically better.
Some investors will argue that the US market is overdue for a massive correction, but keep reason number 2 in mind…
Reason 2: The Economy is Fine
Despite claims we’re on the brink of World War III (which is absolutely horrific), the economy is fine. Fed chair Jerome Powell said so last week (for what that’s worth) and the US economy continues to grow (a trend that seems very likely to continue over the long term, especially compared to the rest of the world).
Trying to time short-term market moves is a bit of a fool’s errand, but over the long-term stocks are likely following the economy bigger and higher (and likely much bigger and much higher!). Betting against long-term US (and international) growth is a mistake.
Own stocks for the long-term.
Reason 3: They don’t know you (or your situation).
The people pounding the table right now about what you should, and should not, be investing in—don’t know you. They don’t know your situation, they don’t know your goals, and they don’t care about you. Keep that in mind, and take anything they say with a grain of salt.
A word about Rebalancing
If your goal is to grow your next egg over the long term, keep owning stocks. If you are in a place in life where you cannot handle short-term stock market volatility (because you need to regularly sell some of your stocks to cover living expenses) then consider owning some bonds (and perhaps money market funds) too. And if your stocks and bond allocations are out of whack with your goals, then it’s always a good time to consider some prudent rebalancing in your investment portfolio.
The Bottom Line:
The market has been volatile and ugly in recent weeks. And there is always someone or something to blame. But the economy remains strong and resilient. And over the long-term, it is a mistake to bet against the people supporting the economy (don’t bet against the US people, or the people of the world for that matter). As long as its consistent with your goals (for most people it is) keep right on owning US stocks for the long term.