Five Moves to Stay Calm When the Market Isn't
Uncertainty remains high, and day-to-day political and economic headlines continue to drive financial market volatility. Concerns about tariffs, inflation and government cutbacks are weighing on both institutional and individual investors. While the stock market has rebounded from its recent low—with the S&P 500 index now 10% above its trough—concerns about the future persist. The Conference Board’s latest consumer confidence survey shows economic expectations at their lowest point since 2011.
In times like these, it’s natural to feel uneasy. That’s why it’s important to focus on what you can control. Here are five portfolio moves you can take now.
Continue to Invest Based on Your Goals and Timeline: Whether your goal is to maximize wealth, leave a financial legacy or, if you’re younger, fund retirement, continue following a long-term approach to investing. Over time, stocks have realized higher returns than inflation and bonds. Realizing this equity premium has required staying disciplined—and not panicking.
Write Down How You’ve Felt This Month: The best time to assess your risk tolerance is when the market is down. This is when your true tolerance reveals itself. Think about a roller coaster. Your level of fear (or, in my case, excitement) always spikes just after you crest the first hill and start speeding downward. The same thing happens during market downturns. If you slept soundly last month, great. Your allocation is appropriate. If you were restless or felt a pit in the bottom of your stomach, it could mean that your portfolio risk needs to be dialed down. A higher allocation to bonds could help you avoid panicking should the next market drop be steeper.
Plan for Short-Term Withdrawals: AAII founder James Cloonan recommended that retirees have up to four years’ worth of planned withdrawals in cash equivalents such as money market funds. This safe asset allocation allows investors to avoid selling stocks when they are down. Four years is also a reasonable time frame to base cash allocations upon for those who are working but have planned withdrawals they cannot risk incurring a shortfall on (e.g., a down payment on a house).
Stress Test Your Portfolio: Look at how your portfolio has performed over the past month. If you own individual stocks, were there any large positions that drove your portfolio’s returns and/or volatility? If you rely on dividend and/or interest income, did anything fundamentally change with those investments? Scan through the financial statements released as part of first-quarter 2025 earnings season. Are there any significant changes between last quarter’s numbers compared to one year ago? A fallen stock price does not necessarily mean the dividend is in trouble.
Check Your Allocation: Does your current allocation match your desired allocation? Small fluctuations are normal. If your mix of stocks versus bonds or your mix of domestic stocks to foreign stocks is off target by five or more percentage points, consider rebalancing. Doing so will bring your allocation back in line with your targets. Unsure of what your allocation should be? Our Asset Allocation Models can provide a guide.
Most importantly, remember that while plenty of pundits project confidence, no one can say with certainty how the ongoing tariff situation will evolve.
What we can say with confidence is that taking these five steps will help you focus on what you can control. They will also keep you on track to achieve your financial goals—whether that means funding a specific need or maximizing long-term wealth.
