Markets took a sharp and sudden turn this week. The S&P 500 is now down 17.4% from its February 19 peak—with over 10% of that drop happening in just the last two trading days. It’s a clear sign of stress hitting the system.
Fueling the downturn? Maximum uncertainty after President Trump announced sweeping tariffs on all imports. Heavy-handed policy changes like this act as wild cards for the economy, inevitably creating short-term uncertainty. And the markets hate uncertainty.
Even so, the selloff remains fairly orderly so far. In a welcome return to normal market behavior, bonds are again playing the traditional stabilizing role they’re meant to play during equity downturns. This is encouraging and reinforces the value of diversification.
While recession risk is elevated, keep in mind that recessions aren’t emergencies for our investment portfolios. Your portfolio was built specifically with these downturns in mind. As Sam Ro puts it, for long-term investors, “getting smoked in the short-term is part of the deal.”
Lastly, keep in mind that this magnitude of uncertainty isn’t sustainable. Historically, people, businesses, and policymakers respond and adapt. Your best move right now as a responsible investor is simply to hang tight.
Hopefully by now you’re learning the drill:
➞ We stick to the plan.
➞ We don’t time the market.
➞ We use bonds and cash to ride out volatility.
➞ If you’re in the accumulation phase, downturns make better entry points. Hooray.
Keep calm and invest on.
Kaylin Dillon, CFP®
