A brief synopsis of policy-driven volatility is as follows: Following President Donald Trump’s announcement that the majority of the new or enhanced tariffs he had imposed on commodities imported from numerous nations would be suspended for 90 days, the S&P 500 saw a 9.5% spike on Wednesday. Following Trump’s first “liberation day” tariff announcement following the close on April 2, the large-cap U.S. benchmark stock index fell 12.1% till Tuesday. Then, with a 3.5% daily drop on Thursday, investors were once again in the negative. As of Thursday, the index had dropped 10.1% for 2025.
The S&P 500 SPX saw a 19.4% loss in 2022, followed by gains of 23.3% in 2024 and 24.2% in 2023 before this year’s decline. All of the numbers above do not include dividends.
Have you felt the temptation to sell into the plummeting market during the worst of this year’s market turmoil? Or have you attempted market timing?
Investors that withdraw from the market to avoid a stock market fall are known to return long after a recovery has begun, which negatively impacts their long-term performance. On the other hand, if you set up an automatic retirement account investment each pay period, you would pay less when the market is sluggish, which might increase your returns over time.
This leads us to the topic of portfolio allocation. What proportion of your portfolio is made up of bonds and stocks? The classic “60/40 portfolio,” with equities making up 60%, might have appeared like an antiquated idea during the largely optimistic stock-market trend as the biggest technology companies rocketed during the past several years. Why pass up these benefits?
However, Paul Merriman examined stock market data dating back to 1970, which demonstrated how investors with lesser risk tolerance would have benefited from a portfolio’s lower equity exposure. For instance, your average yearly return, with dividends reinvested, would have been 10.9% from 1970 to 2024 if your whole portfolio had been invested in the S&P 500. However, your average return would have been 10.2% if you had chosen a portfolio that consisted of 80% stocks and 20% government bonds. You may find it easier to wait and weather a stock market meltdown if you have a smaller equity allocation. Avoiding the temptation to lock in losses by selling into a declining market could be beneficial.
Merriman went into greater detail on how various portfolio allocations would have reduced investors’ volatility risk and offered three recommendations to assist you determine the proper level of stock-market risk for your investment portfolio.
Timely advice: Extremes in the stock market are increasingly commonplace. “Remaining emotionally detached is crucial.”
Additionally, a look at technological aspects Even though the stock market is booming, sellers are probably waiting here.
The stock market did not exhibit the most unsettling response to Trump’s tariff agenda.
Even President Donald Trump may change his mind in response to daily market activity.
As Trump’s tariff intentions have changed, coverage has naturally turned to the stock market. The bond market, however, is far bigger. Although estimates differ, according to LSEG’s data, the global bond market was over four times as big as the equity market at the end of 2023, based on the face or notional values of bonds.
Joseph Adinolfi described how the decline in the price of U.S. Treasury bonds caused institutional investors to panic. When markets fall, investors typically anticipate that government bonds will be a safe haven. However, the yield on 10-year Treasury notes, BX:TMUBMUSD10Y, increased from 4.01% a week ago to 4.44% early Friday. Bond market prices decrease as yields increase and vice versa.
More bond-market coverage:
- Punishing bond-market selloff likely forced Trump’s 90-day tariff delay: former J.P. Morgan chief strategist
- Treasury Secretary Bessent expects bond market will calm down, suggests spike in yields is normal trading
- Why bond-market tumult likely peaked Wednesday morning – before Trump’s tariff flip-flop
A related threat to tech stocks
Laila Maidan explained how the bond market can affect valuations for stocks in an industry you might expect to be immune from tariffs.
Are you prepared to purchase?
Money managers typically advise purchasing equities after the market has corrected. According to FactSet, the S&P 500’s forward price-to-earnings ratio closed Thursday at 19.1, having traded at a forward P/E as high as 22.6 during the preceding 12 months. The forward P/E ratios are calculated by dividing prices by market capitalization-weighted rolling consensus earnings-per-share predictions.
The forward P/E of the S&P 500 was somewhat higher than its 10-year average of 18.6 at the close of business on Thursday.
David Giroux, who oversees the $63 billion T. Rowe Price Capital Appreciation Fund PRWCX, which has the highest rating of five stars in Morningstar’s “U.S. Large Blend” investment category, was interviewed by Michael Brush. Although the fund is closed to new participants, Giroux-selected stocks are also included in the new T. Rowe Price Capital Appreciation Equity ETF TCAF.
In addition to arguing for two of the “Magnificent Seven” tech-oriented stocks that dominated the bull market in 2023 and 2024, Giroux outlined “compelling” value in two industries.
The timeline for Social Security
Concerns regarding Social Security are common among MarketWatch readers. Under Trump’s Department of Government Efficiency plan, the agency has been reducing its workforce, raising concerns that any issues with benefit payments to individuals may be more challenging to resolve. This timeline, which includes the most recent developments, details everything that has transpired with Social Security this year, according to Alessandra Malito.
Additional protection for retirees: While the S&P 500 is down, should I collect my mandated minimum payout right away, or should I wait till the end of the year as usual?
How to get ready for a downturn
Following Trump’s tariff announcements, Jamie Dimon, the CEO of JPMorgan Chase & Co. (JPM), stated this week that he believed a recession was imminent.
On Friday, Charles Scharf, the CEO of Wells Fargo & Co. (WFC), stated that the bank was “prepared for a slower economic environment in 2025.”
Based on the lessons financial professionals have learned from past periods of economic decline, Beth Pinsker outlined 11 strategies for preparing for a recession.
The Moneyist tackles the hardest challenge for investors
Quentin Fottrell – the Moneyist – helped readers through their emotional reactions to the stock market’s gyrations:
- I’m five years from retiring and moved my money into non-U.S. stocks. Was that a big mistake?
- My grandmother is in her 70s and has $400K in stocks. Is now the time to unload them?
- ‘This is not in my tolerance level’: I inherited a $600K portfolio from my father. Should I move it all into bonds?
- ‘I’ve made the most money over the last 30 years buying solid companies in terrible markets’: Should I start buying?
