Stocks Stumble Amid Tariff Worries, Experts Urge Calm
The stock market experienced a turbulent week as anxieties mounted over the potential economic fallout from President Donald Trump’s trade policies. While the benchmark S&P 500 index managed to avoid slipping into correction territory, defined as a decline of 10% or more from a recent high, it still closed the day down by 0.76%, settling at 5,572.07 points. This was a recovery from a daily low of 5,528.41. Similarly, the Dow Jones Industrial Average took a hit, dipping by 1.14%, and the Nasdaq composite also felt the pressure, falling by 0.18%.
Despite the market’s jitters, investment strategists are advising Americans with retirement accounts, such as 401(k)s, to resist the urge to panic. Experts emphasize that regardless of one’s stage in life, rash decisions driven by emotion can be detrimental to long-term financial security.
Sam Stovall, chief investment strategist at CFRA Research, a prominent investment research and analytics firm, cautioned against emotional reactions, stating, "The people who would be hurt by [the stock market dip] are the emotional ones who are likely to do something irrational. That could be somebody at any age."
The uncertainty surrounding the U.S. economy has been a key factor fueling investor unease. Recent surveys indicate a decline in consumer optimism, and several retailers have issued warnings about potential cutbacks in consumer spending.
The downward trend in stocks began on Monday following President Trump’s reluctance to dismiss the possibility of a recession this year. The selloff intensified on Tuesday after Trump announced plans to double U.S. tariffs on Canadian steel and aluminum. Although he later reversed course that same evening, the initial announcement had already rattled investors.
The duration and severity of the market downturn are expected to hinge on President Trump’s future tariff decisions, according to Stovall.
"Should the president decide that we’ve gotten enough concessions from our trading partners, then I think the market would experience a sharp rebound," he said. "But the longer the trade disputes linger, the deeper the market will eventually fall."
For younger Americans who are just beginning to build their 401(k) savings, market selloffs can present valuable opportunities, according to Ryan Detrick, chief market strategist at Carson Group, a financial services firm.
"They say the stock market’s the only place where things go on sale, yet everyone runs out of the store screaming," Detrick noted. However, he stressed that "for longer-term investors, it’s important to remember: scary headlines and volatility happen every single year. And the truth is, 2025 is not any different."
Stovall echoed this sentiment, advising younger Americans to maintain their investment strategies and take full advantage of any employer-sponsored 401(k) matching programs. He suggested that, if possible, now might be an opportune time to consider increasing monthly contributions, with a minimum goal of investing enough to receive the maximum match from their company.
"Time is the great neutralizer of volatility. The longer you have, the less your portfolio will have felt these market upsets," he explained.
For Americans nearing retirement, Stovall believes there is still ample time to recover from any losses incurred during the recent market dip, especially given the stock market’s tendency to rebound relatively quickly.
Historical data from CFRA reveals that, as long as the stock market doesn’t experience a drop of 20% or more, entering bear market territory, it typically takes an average of four months to recover from a correction.
"Don’t let your emotions become your portfolio’s worst enemy," Stovall cautioned. "The only way to lose money is by selling what is down."
Detrick emphasized that older Americans should ideally have a more diversified portfolio capable of withstanding market selloffs.
"For someone closer to retirement, diversification is your friend," Detrick said. "To have some gold, to have some bonds, to have some cash, to have some stocks… that should be what they’re thinking about right now."
Tom Hainlin, senior investment strategist at U.S. Bank, advised Americans to ensure they have sufficient cash reserves to cover short-term needs and then concentrate on establishing the appropriate asset allocation to achieve their long-term financial goals.
"So that’s the right mix of cash, stocks, bonds, real estate or what have you," he said. "We think as long as you have those correct, then you can endure these periods of market volatility."
The stock market dip coincides with the Trump administration’s efforts to reduce the size of the federal workforce.
When asked if the stock market dip might make federal workers more hesitant to retire, White House press secretary Karoline Leavitt defended President Trump’s tariffs, stating, "There’s great indication to be optimistic about where the economy stands." Her response underscores the ongoing debate surrounding the economic implications of the administration’s trade policies and their potential impact on the financial well-being of American workers and retirees.
In summary, while the recent stock market volatility has sparked concerns among investors, financial experts are urging individuals to remain calm, avoid emotional decision-making, and maintain a long-term perspective. Diversification, particularly for those nearing retirement, and taking advantage of employer-sponsored retirement programs are key strategies for weathering market uncertainties and achieving financial security. The market’s future trajectory will likely be heavily influenced by President Trump’s trade policies, but experts believe that a well-balanced and diversified portfolio can help investors navigate these uncertain times.
