So you’ve probably all seen the tariffs, and noticed that the announcement immediately turned a positive day for markets into a negative one.
I am, of course, worried that Trump’s actions will lead to a sell-off in markets.
I know, of course, one is not supposed to time markets, and I never ever have. Indeed, I’ve got a pretty good return with my 70%S&P and 20% Bonds (the other 10 is odds and ends, long stories, etc. we’ll ignore those for now). Cash is not counted in the percentages.
My money is about 1/3 in a taxable account and 2/3 in an IRA.
I’m considering moving 25% into a money market while we ride this out. Regarding timing the markets, we’ve never had anything like Trump before, someone who literally thinks all the economists know nothing and he’s just going to do what he wants.
I mean, it’s cliche to point out the role tariffs played in the Great Depression, but it’s true.
Regarding the thread: This shouldn’t be a thread about Trump, but analytical discussions of his policies and predictions thereabout are fine.
It always safer to pull money out of the market, but it’s not always smarter. As you said, you can’t time the market, if we could, we would be the richest people on the planet. I’ve heard financial analysts say that the market is primed for growth given the current economic and political situation. Since I don’t need the money right now I’m holding off selling just in case there is an upsurge in the offing. If it comes as some expect, I’ll be selling off and taking my profits then.
Possibly apropos, yesterday my husband mentioned it might be a good idea to keep a few thousand in cash in the house, in case the banks crash or are locked temporarily. … just a measure of how a perfectly sane and careful person is feeling right now.
Although our toddler president hasn’t bothered yet, there is no particular reason I can see why he wouldn’t eliminate, say, the FDIC, as a 'cost saving measure.
This is key. Rationally predicting the markets is impossible I think. I would be unsurprised if the market crashes. And unsurprised if if continues a great run. If I needed the money now I would make sure I have enough cash to ride a crash out. With a long time horizon before pulling much out I will stay aggressively positioned, and if it drops wait it out.
One could always buy gold, I suppose. Cash in the bank is your last refuge if the markets crash, and if the FDIC and NCUA go away, we’re all in the shit. I’ve been in cash since the first Trump administration for two reasons: I didn’t trust him not to do something to cause the markets to collapse, and I didn’t need any more money than I already have. So yeah, I missed a big run-up, but the peace of mind was worth it.
The announcement was made late Friday, and it instantly turned an up day into a down one. I predict a pretty steep sell-off on Monday. From there, if he digs in his heels on tariffs, then I expected a longer downturn, and if these things really trigger a recession and inflation it’ll get bad. And the best example we have is the 30s, and that was a ten year ordeal.
On the other hand, if tariffs last 3 days and then get reversed, I think markets would rebound and things would return to where they are, more or less.
The rationale behind cash is to have some dry powder.
Remember that swings in the market, while unpredictable, are expected. Those that take money out have to time when to get back in, in order to take advantage of downturns. Leaving your mutual funds alone, for example, and if you have dividends re-invested, means those funds may be picking-up stocks at bargain prices when the market is down, so when the market swings back up, you do well. All without “doing” anything. You sell when the market is down and you lock-in your losses.
This is my expectation from the current drama, that it will be short-lived. The market had a major sell-off at the start of the pandemic due to irresponsible messaging from The White House, but it came back, and with a vengeance. The next few years are likely to include a lot of swings like that, so if you need the money soon and can’t handle the swings, then yeah, safer and calmer waters are probably in order for your money.
I moved to a more cash-heavy position in November after the election. Fidelity had a money market at 4%, which is now closer to 3.2%. I may move a larger chuck of my portfolio into an indexed annuity, which typically have 200% downside protection, and offer a portion of any upside returns (usually around 50-70%, but I haven’t looked at any prospectuses lately). They also are free of fees.
I’m not trying to be rude, but do you think you know more than the investment bankers, fund managers, and financial analysts? Don’t you think they may have had the same thoughts and baked them into their financial decisions? You are working with public information here that everyone else has access to as well. Assuming an efficient market, all these considerations are already baked into the price of stocks. So, stocks could go up, go down, or stay the same. But to think that you can predict it better than anyone else is not rational.
I try to be prepared for anything to happen as best as I can. I have stocks, bonds, cash instruments, a little precious metals, etc. I am not changing unless my willingness or need to take risk changes.
You say that we never had anything like Trump before. That may be true, but we never had anything like the sub-prime loan crisis in 2008, Covid in 2020, the dot-com bust of 2000, etc. Everything is always new and unprecedented. The market has always recovered. I see no reason to think that it won’t be the same for this.
I was just wondering about them myself. I bought in the last time when they were up around 9% or so. Once they dropped down I cashed them all out, as the rate just wasn’t attractive. You can get CDs now that pay better than 3.11%. If inflation starts to rise, I may look at I-bonds again.
No, but they aren’t telling me how they’re moving their money around, although the sudden 1% drop tells me they have concerns about being in equities.
Sure, and if I’d moved to cash before each of those I would have looked like a genius.
The overwhelming view of economists is that tariffs will raise prices, hurt productivity, and slow economic growth. If you knew those things are coming, what position would you want to be in?
my take (and I can look back on a satisfactory life-long history of piss-poor financial choices ;-):
there is a good chance for a dit-for-dat-trade war with US’ prime tradepartners … that worries me - if markets hate one thing more than bad news, its uncertainty
what worries me more is that the chinese deep-AI (or what is it called) might have punched the air out of the whole “AI-phantasy” that was in the market … I am not sure “entities” will keep spending billions of dollars for AI-thingies, just to come out as fools that grossly overspent, if the chinese really managed to do their thing 2,3 or 4 orders of magnitude cheaper … but there is a chance that it turns into that superconductor at roomtemperature news we had a year or two ago and that was all the craze.
so yeah … once again, interesting times we live in
sure, but would you have known when to get back in? Timing the market requires you both to know when to get out AND when to get back in. Very difficult to do. The equities market was essentially flat from during the first decade of the 2000’s, and then the subprime crisis hit, further depressing things for a few more years. Meanwhile, the Covid dip was something like 3 months. Very tough to know when to get back in.
I don’t see a credit bubble (2008) or equity bubble (2000) or pandemic (covid). If anything an asset bubble may form which helps the rich, but if tariffs cause inflation, interest rates will rise, and Dummy demands low interest rates, so something has to give. Interest rates would be the biggest factor, and psycho-Dummy doing something hasty (another mismanagement of a national disaster). I haven’t changed my holdings yet-- about 65-35 equities/bonds. It depends on one’s risk tolerance.
As long as the big 7 (AAPL, FB, AMZN, etc) or Dow companies are profitable and don’t adapt to losing market share, I don’t see a collapse on the 2000, 2008 levels, but we have to see what the next earnings season indicates.
I-bond yield adjusts with the government-provided measure of inflation.
As Paul Krugman pointed out at:
Summary: There are real-world examples of governments “adjusting” numbers for political expedience. The Bureau of Labor Statistics has a reputation for honesty, but how much of that will continue after more of Trump’s purging of the civil service is in question.