The immediate impact of recent tariffs by President Donald Trump’s administration on a list of countries has resulted in turbulent times for Wall Street. Big drops have resulted in many people looking at their stock portfolios and retirement accounts and calling their financial planners as a result.
“It causes a little bit of fear and discomfort,” said Jesica Ray, a senior lead adviser at wealth management firm Brighton Jones in D.C.
Ray said she has been taking many calls from clients concerned about how the market is responding and wondering what they can do to protect themselves from further losses.
“What happened is that heading into the announcement, investors had largely priced in the idea that tariffs were coming, but it just wasn’t to this extent, which is why we’ve seen as much of a reaction beyond what was already priced in,” Ray said.
She said despite the losses on Wall Street, “the markets are working as they’re supposed to,” with bonds doing well despite the volatility. Ray said year-to-date bonds overall are up 2.5%.
“We’re choosing to let portfolios do what they’re designed to do, which is letting the things that are doing well outperform and letting the things that aren’t doing well have time to recover while being opportunistic,” she said.
She said for her clients, how they should respond depends in some cases on when they intend to retire.
“If you’re retired or nearing retirement, you probably have a little bit more fear if your 401(k) was growth oriented, and you see those numbers dropping. And if you’re younger, you probably are more comfortable knowing you’re in it for the long run,” she said.
Ray said for her clients, part of the strategy is making sure there is at least eight years’ worth of money to cover cash needs available.
She said one question she’s heard is if — before the tariff announcement — investors should have shifted to all cash. Her answer to that question is no. Ray said it is common to see a sharp market response to events such as the tariffs announcement.
“If we consistently look to sell stocks before every impactful event, we likely will fall short of capturing the full return of equity markets over time,” Ray said.
For long-term investors, Ray said the situation may present some opportunities to invest but she warns against trying to guess where the bottom will fall.
“Instead of waiting to see if that goes down more, check to see if you can shift a little bit over into U.S. equities now and then, keep doing it if markets trend downward ongoing,” she said.
She said the discussion with a financial planner should be on how much risk you are willing or able to take. That could lead to conversations on moving excess cash into U.S. markets or expediting IRA contributions, or even considering conversions to Roth IRAs.
Also, she said for parents, there could be an opportunity to “super fund” 529 college saving accounts. “So those dollars get in early and can grow tax free if used for qualified expenses,” she said.
Ray also warns against assuming what your friends and family are doing, in terms of how investing will work for you, because your income and expenses are most likely different. Also, Ray urges investors to not make decisions based on their emotions.
“It’s so important not to let feelings drive investment strategy,” Ray said.