The huge swings rocking Wall Street and the global economy may feel far from normal. But, for investing at least, drops of this size have happened throughout history.
Stomaching them is the price investors have had to pay in order to get the bigger returns that stocks can offer over other investments in the long term. Here's a glimpse at what's behind the market's wild moves and what experts advise investors young and old to consider:
Wall Street's main benchmark, the S&P 500, has lost more than 16% since setting an all-time high on Feb. 19, mostly because of worries about President Donald Trump's tariffs.
Any kind of uncertainty around the economy will give Wall Street pause, but the trade war is making it more difficult for companies, households and others to feel confident enough to invest, spend and make long-term plans.
The tariffs announced on “Liberation Day” sent stocks reeling to their worst day since since the COVID crash of 2020 because they were much harsher than investors had been expecting. They also raised the fear that Trump may push through with them to win long-term gains, such as more manufacturing jobs in the United States.
The hope among investors had been that Trump was using tariffs merely as a bargaining chip to win concessions from other countries. Some big names on Wall Street still think that's the case, and a moderation of tariffs would help stocks recover, but it's less of a certainty now.
Regularly enough. The S&P 500 has seen declines of at least 10% every year or so. Often, experts view them as a culling of optimism that can otherwise run overboard, driving stock prices too high.
Before this recent downswing, many critics were saying the U.S. stock market was too expensive after prices rose faster than corporate profits. They also pointed to how only a handful of companies drove so much of the market's returns. A group of just seven Big Tech companies accounted for more than half of the S&P 500's total return last year, according to S&P Dow Jones Indices.
Anytime an investor sees they’re losing money, it feels bad. This recent run feels particularly unnerving because of how incredibly calm the market had previously been. The S&P 500 is coming off a second straight year where it shot up by more than 20%, the first time that's happened since baggy pants were last in style before the millennium.
Selling may offer some feeling of relief. But it also locks in losses and prevents the chance of making the money back over time. Historically, the S&P 500 has come back from every one of its downturns to eventually make investors whole again. That includes after the Great Depression, the dot-com bust and the 2020 COVID crash.
Some recoveries take longer than others, but experts often recommend not putting money into stocks that you can't afford to lose for several years, up to 10. Emergency funds, for things like home repairs or medical bills, should not be invested in stocks.
“Data has shown, historically, that no one can time the market,” said Odysseas Papadimitriou, CEO of WalletHub. “No one can consistently figure out the best time to buy and sell.”
For years, the U.S. stock market was the best by far to invest in worldwide. Now, more investors are questioning wither U.S. exceptionalism is dead.
But it could all be a reminder that investors often do best when they have a mixed set of investments rather than going all-in on just a few. And investors may no longer be as diversified as they thought after years of sheer dominance by the Magnificent Seven over the U.S. stock market and by Wall Street over global markets.
“It is hard to roll with the punches when some days you feel like your portfolio is being pummeled,” said Brian Jacobsen, chief economist at Annex Wealth Management. “But those moments should pass. A diversified strategy that is thoughtfully adapting to changing circumstances can’t prevent the punches, but it can help soften the blows.”
Phil Battin, CEO of Ambassador Wealth Management, advises investors to make sure they diversify their investments across regions and sectors to reduce risk. He says to lean towards “resilient sectors such as consumer staples, utilities and health care, which are less reliant on international trade.”
The proliferation of online trading platforms and the ease of smartphones has helped create a new generation of investors who may not be used to such volatility.
But the good news is younger investors often have the gift of time. With decades to go until retirement, they can afford to ride the waves and let their stock portfolios hopefully recover before compounding and eventually growing even bigger.
Stephen Kates, financial analyst at Bankrate, says “now is not the time to make emotional decisions.” Young investors should “re-anchor to your (long-term) goals,” and consider using a financial advisor to help navigate uncertain times. “Investors with ample time to stay invested should remember how lucrative patience has been over the last 15 years,” Kates said.
Older investors have less time than younger ones to allow their investments to bounce back. But even in retirement, some people will need their investments to last 30 years or more, said Niladri “Neel” Mukherjee, chief investment officer of TIAA Wealth Management.
People who have already retired may want to cut back on spending and withdrawals after sharp market downturns, because bigger withdrawals will remove more potential compounding ability in the future. But even retirees, at least in the early part of retirement, should still be invested in stocks to prepare for the possibility of decades of spending ahead.
“You may want to slow that down and pick that back up once the market recovers,” Mukherjee said, “but it all comes down to having that conversation with your adviser and your portfolio manager.”
No one knows, and don't let anyone tell you otherwise.
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38 Comments
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Jay
Captain Obvious stuff right here. Imagine walking into a store and spotting a pair of shoes you really like - but they're a bit out of your price range. You think to yourself, I hope these go on sale. Then, like magic, they do - and not just a small discount, but a major one.
What do you do? You don’t suddenly think, "Oh no, they're on sale" - something must be wrong with them! Of course not. You grab them, maybe even a couple more pairs - because they're the same shoes you liked - just at a better price.
That’s EXACTLY what’s happening in the stock market right now. Solid companies are temporarily marked down. Smart people don’t panic - they take the opportunity to buy quality at a bargain.
Nifty
The depression of 1929 went on for years, and the market wound up dropping almost 90 percent. Where to get out or in is the problem, but buying things because they are so much cheaper now than last week isn't a strategy. It a can get worse, little by little, for years.
Business doesn't like policies that change overnight. When governments become more committed to stability, democracy, and freer trade again, people will start investing again. I don't see that on the near horizon.
blackpassenger
Time to load up. Learned that lesson the hard and COSTLY way
Peter Neil
Oh really?
Trump and attorney general Bondi filed to sell shares in Truth (Pravda in Russian) one day before the tariff announcement.
Dow futures market fell 1,500 points on Sunday.
The grift is disgustingly big.
kibousha
Buy high, sell low!
GBR48
Young investors make gains on any stocks on any market when those stocks are rising. They sell the moment those rises slow. They now trade stocks like crypto. They hold them ephemerally, not long term. Only institutions bury money in stocks long term (and even some of them are cottoning on and switching).
Government regulations and fine-taxes will be used increasingly as ways for regimes to bilk money from the tech sector, which will undermine the stocks that have driven global growth for decades. And the tech sector isn't doing so well. There has been little innovation for decades. The metaverse and NFTs were disasters. They went all in on AI, but that is a money pit with no business case. The tech sector is starting to look threadbare and desperate, shedding jobs and trying to replace people with third rate chatbots. The tariffs, if they are not bargaining counters, may initiate a global recession. Segmentation of the global internet with digital borders and heavy access restrictions will be the final nail in the coffin of post-WWII global growth.
Pharma did well with Covid, but that may have been a one trick pony. The green revolution is hitting the skids, undermined by Trump, supply chain ruptures, high costs, lack of staff and an increasingly universal lack of disposable income as inflation and interest rates rise. If the global economy does tank, regimes will have to start a much bigger war to keep the proles in order.
The Nomad
Instead of waiting and see it drop more you can also sell and cut your losses and buy in when it is cheaper. Some stocks have gone down 30 percent or more in a few days, looks like the carnage will continue looking at the premarket movement. Maybe a couple of weeks later you can buy the same stocks for another 30 percent lower price and decrease the waiting time for recovery
Vanillasludge
kiboushaToday 08:15 am JST
Buy high, sell low!
Stop stealing my secrets!
Vanillasludge
I learned the hard way to forget trying to time the market.
During covid we all thought the world was ending but thankfully I was talked off the ledge by my advisor.
Same thing here. Selling now just locks in your losses.
Nibek32
Wow, trump is 2 for 2 on destroying the American economy.
He did bankrupt 4 casinos, so sounds about right.
Some dude
"We humbly request that the common people hold on to their stocks until we decide they can't go any lower, then we demand that you sell them so that we can buy them for pennies on the dollar", announced a representative of the world's billionaires.
Chabbawanga
Yes, HODL sucks. New players, new rules. And the majority of this is done by algos anyway, just heading for the areas of highest liquidity.
BertieWooster
Buying and selling shares is gambling. You win some, you lose some. Those who win are either lucky or they have friends in high places.
Blacklabel
Buying opportunity of a lifetime.
Peter Neil
BlacklabelToday 09:29 am JST
Buy at 9 AM Monday. I dare you.
lostrune2
Get ready for stagnation Japan!
Fighto!
Down 8% today. Not a great time to sell. Hold, and wait it out.
I'm tipping the Nikkei will be testing 35,000 points by years end.
Jimmy Ray
I've been in buy & hold mode for a long while, but last week I finally moved to bonds and cash. It was a good move.
Sorry to say, but recent events are too abnormal, and there are still many years of this to endure.
There is no way things are getting better anytime soon, I am betting that things get much worse.
Fighto!
Gold is also a very safe bet, if anyone has a little cash to park.
fallaffel
Long term the market goes only one direction. It's pretty easy to make money in stocks over 10+ years if you don't overtrade.
travelbangaijin
Institutional investor pulls out and buy more later but they got people here telling you to hold and keep losing,,
Yrral
Buy a lottery ticket,better results
Blacklabel
But realistically there is going to be half a day to 1 more day of this before the bounce back.
But it’s pointless to try to time the market exactly, even the pros can’t do that.
Blacklabel
So aren’t the markets in all the other countries crashing too? Why would that be if tariffs only affect USA?
they better get Trump on the phone.
Blacklabel
look at the Hang Seng. -10.3% already. Ouch.
Jay
Only a good move if you’re cool with locking in lower returns and missing out on long-term equity growth.
Over the long term, a solid index and mutual fund ALWAYS outperforms timing plays like moving to cash or bonds - broader diversification, lower fees, and steady exposure to market growth.
Jay
Bertie, it sounds like you might be confusing investing with trading. The latter with its constant buying and selling is just glorified pachinko - flashing lights, short-term highs, and long-term regrets. Real investing is about putting your money to work for you in something like the S&P 500, where historically, it grows steadily over time. If your cash is just sitting there, it’s not just idle - it’s depreciating. EVERYONE should at least be in a broad market index if they want their money to not only keep pace with inflation but build actual real wealth.
Blacklabel
Man, these are GREAT American companies on sale 20-40% off.
Who wouldn’t buy as many as they can at these prices?
Blacklabel
Annnd here we go.
Peter Neil
Stock market taking another deep dive Monday morning.
Entering a "self-induced economic nuclear winter" says Bill Ackman, Trump's staunch ally who now wants a time out.
wallace
Wall Street's S&P index drops 3.5% as turmoil from Trump's assault on world trade enters its second week. Hang Seng closed 13% down. Nikkei 225 slumped 7.8%. The FTSE 100 shed 4.3%.
JPMoragns Chase boss Jamie Dimon warned the tariffs will exacerbate inflation.
Blacklabel
im up 3.63% already in 20 minutes.
thanks for the dare.
Blacklabel
Now my 2nd stock of 3 that I bought just hit green.
Blacklabel
Hey guys why so quiet?
18 of the 20 stocks in my entire portfolio are green- could that be why?
wallace
About 20 minutes into trading, the Dow Jones Industrial Average was down 3.6% at 36,947.62.
The broad-based S&P 500 tumbled 3.5% to 4,897.96, while the tech-rich Nasdaq Composite Index shed 3.7% to 15,017.24.
Black Monday.
wallace
Wall Street drops 20% below its record and markets reel worldwide as Trump digs in on his tariffs.
Blacklabel
aren’t the Dow, Nasdaq and S&P super green now?
why yes they are.
Green Monday!
Blacklabel
I’m up 8.2% total on what I bought 47 minutes ago. So I’m out, that enough for today.
thanks “Peter”! Let’s not forget this lesson you learned.