Treat The Trade War Like Any Other Stock Dip

Photo: Negative Space, Pexels

The stock market has its guard up now that increased China tariffs here for an indefinite stay. On Monday the S&P 500 had its worst day since January, the Nasdaq had its worst dip this year, and the Dow dropped 617 points. Apple stock also fell by nearly 6%, interest rates on the corporate bond market went up, and prices for soybeans went down.

In fact, the trade war is to blame for about a week of falling performance on the stock market. Time to panic, right?

Actually, please do not panic. Some stocks already rebounded a bit this morning. And they’re likely to bounce up, down, and sideways for the duration of the trade talks. “This is not something that’s going to be resolved tomorrow and anybody who says they know exactly how this will play out is spinning a yarn,” Greg Luken of Luken Investment Analytics told CNBC.

And on Monday, Citi told clients, according to CNBC, “Ongoing trade flare-ups may continue to swing the stocks in the near-term, but we think the market may have priced a lot of this in.”

So the market is going to weather these “flare-ups.” What about your money?

What to do with your investments during the trade war

Last week, Nicole shared Michelle Singletary’s advice: Don’t even look at your portfolio for a few weeks. Wait until the trade war is over. Things are going to be rocky for a while, so don’t give yourself heartburn by checking on it too often.

But, you may say to me, “I can’t! I must meddle! I’m too nervous to be patient! Please put oven mitts on my hands so I don’t do anything rash!”

Our advice from 2015 (do you even remember that stock market dip? I’m going to guess no.) still stands: Don’t sell in a panic. Instead, re-examine your allocation.

As CFP Leah Snell told Lifehacker then:

Consider doing some research and develop an allocation that is both comfortable and suitable for your risk tolerance in both up and down markets, so that this next time the market has increased volatility, you are better prepared financially and emotionally.

If you’re investing in search of big returns right now, call your financial advisor for guidance. Grabbing some stocks that have declined now while prices are low may boost your future gains. Consider it a discount on Apple — or any other hot company you’ve been eyeing.

But if you’re investing for the long-term, like your later retirement, a portfolio that can weather the dips and dives will serve you best in the long run. That may mean moving funds into safer investments (typically, bonds instead of stocks) if you’re getting close to retirement. Or if you have run out of Rolaids and just want to feel like it’s all going to be OK.


Comments

    I love Trump. Yes A trump supporter here. It is Trump tweets which move the market most. His tweets are mostly BS, but that are fantastic if you want to make some money on the stock market.

    So just wait for the negative tweet as it will be sweet. Then buy the now cheap stocks for a day or two, and sell as the stock jumps back to higher. Heaps good fun. This has played out over Trump's term many times. I expect it is a ploy by him too, so get on the winning Trump wagon.

    I must go on.....
    And as for the Trade War side of things. Hats off to the USA for tariffs on Chinese imports. Well done.

    I can not figure out why we Australians love to buy Made In China; buy from a barbaric country who torches and detains our political visitors, builds military installations in the SC sea ( for what motive), medals in our elections. Or maybe we just like cheap products. This dog will bite when you look away. But hey we can still by the dip :)

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