A Closer Look at the Downturn
The recent rollercoaster of the U.S. Markets might have you in a panic – asking yourself:
What happened to my 25% returns from last year?
Is a crash going to happen?
Should I be making drastic changes to my portfolio?
It’s only human nature to be anxious right now, so today I’ll provide objective insight on what’s going on and what could come next.
Remember, no one can predict the future, so take everything you read on these topics with a grain of salt. Regardless, it’s important to stay informed and avoid making decisions based on fear.
So What’s Driving Things Down?
Trade Policy Changes: The U.S. recently imposed additional tariffs on Mexico, Canada, and China creating economic uncertainty. A tariff is a tax imposed on imported goods, making foreign products more expensive. In theory, this encourages domestic production while potentially boosting jobs – a key goal of Trump’s policies.
Sounds pretty great for the U.S., right?
Not necessarily, as tariffs could backfire by raising consumer prices, causing job losses, disrupting supply chains, and slowing economic growth. Markets dislike uncertainty, hence the recent drop-off.
On the other hand, these tariffs may just be a bargaining tool for better trade terms. If successful, this strategy could result in a more favorable economic position for the U.S. in the long run.
Keep in mind that tariffs aren’t the only factor moving the markets. The cooling of AI hype, a sell-off in tech stocks, and growing recession fears are also contributing to the downturn.
What Should You Do Next?
Sure, I’m just a random finance guy on the internet, but here’s my plan given everything happening right now.
Zooming Out: Yes, the market has been down lately, but when you take a step back (ex. comparing today vs. 5 year ago) this dip is hardly noticeable. Just look at the S&P 500 chart below:
In the short-term, markets could continue to drop, but I trust that the long-term vision of growth remains steady.
Keeping an Emergency Fund: No matter what’s happening, I make sure my emergency fund is fully funded. Common advice is to aim for 3 - 6 months’ worth of expenses in cash. I keep a full year’s worth since I’m more risk averse.
Dollar-Cost Averaging: I’m still investing in my 401(k), IRA, and brokerage accounts at regular intervals like nothing has changed. Some even suggest this dip is a buying opportunity as stocks are “on sale.”
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Steve | Feasible Creative
“Be fearful when others are greedy and greedy when others are fearful.” - Warren Buffett
Disclaimer: The content provided in this newsletter is for informational and educational purposes only. It is not intended to be a substitute for professional financial advice. Please consult with a financial advisor before making any financial decisions.
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