Happy Liberation Day?
Is it Time to Panic Part 2
Yesterday, President Trump unveiled the United States’ new tariff policy and declared it “Liberation Day”.
Does the country really need to liberate itself from anything/anyone? Maybe, if you believe the United States is a declining world superpower with unfair trade deals. Is raising tariffs on foreign imports the answer to cementing the United States position in the world?
The markets will give us this answer over the next few weeks/months/quarters. If day one in the markets is any indication, the answer is a resounding no.
In my previous post, “Is It Time To Panic?”, I wrote about how friends, family members, and clients are very concerned with what might happen. Since then, I’ve only seen an increase in stress-filled conversations about what the future holds.
Let me drop this language in higher up in the post than I usually do:
Nothing in this email is intended to serve as financial advice. I don’t know your personal circumstances and would never provide financial advice through this medium. This newsletter is intended to be educational and entertaining. Please consult a financial professional and do your own research before making any changes to your portfolio.
With that said, what can we do as individual investors in times of volatility?
First, look inward. What inning of life you are in?
How you should react to volatile times depends a lot on your life stage.
Are you young and employed and want to save for retirement? Great, keep buying.
Are you a 45-year old government worker with two kids and a mortgage who is afraid of getting laid off by a chainsaw-wielding Elon Musk? It might make sense to pause contributions to investment accounts to make sure you have enough liquid funds to cover cover a prolonged period with no income. If you think you have enough to weather the storm? Keep buying.
Next, are your finances resilient enough to withstand market volatility?
If you are retired, how much of your income is coming from sources like social security and/or a pension? How reliant are you on an investment portfolio for income?
Are your assets well-diversified? If your portfolio is mostly US stocks, you’re getting crushed today (and this year). If you also have international stocks and bonds in your portfolio, your returns are likely looking a lot better today and year-to-date.
Finally, what is your time horizon for using your invested funds?
Have you clearly defined what your investment accounts are actually being invested for? Is your account for a house downpayment in 2 years or for your retirement in 20 years?
My philosophy is to set asset allocation for each account to serve the time horizon of the account’s objective, combined with risk tolerance/capacity. Any money that you may need to fund expenses in the next two years should not be invested in risky assets like stocks. If you are investing for something 20+ years away? The movements of the markets today and next week and next month are fun to watch, but are relatively inconsequential for a long-term investor1.
This is where the bucket strategy works wonders for staying invested in retirement. If you know you have 1-3 years of portfolio withdrawal needs in cash and another 5-7 years in bonds, you sleep a lot better at night knowing the rest of your portfolio can be invested aggressively2.
Wall Street does not like the tariff news. The S&P 500 is down over 4% today as of writing this. If the tariffs are implemented as presented and stay on for years, it’s very possible there is a lot of downside risk remaining.
One of the reasons the market isn’t down more is because the big money doesn’t think all of the announced tariffs will be implemented. Foreign leaders will negotiate with Trump and tariffs will be lowered or removed.
The main arguments for staying the course with your investments throughout this time are:
1) tariffs may be lowered or come off completely as countries negotiate
2) stocks may continue to drop, causing a new fiscal stimulus package that lifts markets
Big down days are often followed by big up days. You don’t want to miss the recovery. It can happen fast. If you’re sitting in cash, you’ll likely miss it.
It is not an easy time for anyone. The best thing to do is determine where you are in your life, understand how resilient your finances are to shocks and trust that markets will perform well again in the future.
Stay calm out there…
“A smooth sea never made a skilled sailor” - FDR
If you want your personal finance questions answered in a future Mound Visits, comment below or send me an email at nick@nineinningfinance.com with your question/scenario.
Also please share this post with anyone you think might find it helpful.
Nothing in this email is intended to serve as financial advice. I don’t know your personal circumstances and would never provide financial advice through this medium. This newsletter is intended to be educational and entertaining. Please consult a financial professional and do your own research before making any changes to your portfolio.
The most recent 20-year period: From Yahoo Finance Historical Data, the adjusted close of the S&P 500 index on 4/1/2025 was $5,633.07. The adjusted close of the S&P 500 index on 4/1/2005 was $1,156.85. That’s ~387% total growth over 20 years. In that 20-year span, we had the 2008-09 Great Financial Crisis and the 2020 Covid-19 crash. All part of the journey.
The bucket strategy is great for mental accounting for where your income will come from in retirement. The tradeoff is it is likely suboptimal from a returns perspective because you are holding so much cash.