In the early 2000s, post-dot-com bubble, Lars Staack opted for a safer route with his retirement funds by investing in S&P 500 index funds. This choice brought him stability and comfort for more than two decades. However, the election of President Trump in November changed everything for him. As Trump made bold statements supporting widespread tariffs, Staack, who retired at 62 two years ago, felt increasingly uneasy about his financial future.
Shaken by the potential impact of Trump’s economic policies on the stock market, Staack began offloading his index funds in January. He shifted his investments into bonds and Treasury funds, which are traditionally considered havens during market turbulence. Today, about a third of his savings remain tied up in stocks. With the recent market swings, including one particularly severe downturn, he’s contemplating moving even more into safer bonds.
“I’m trying to navigate this volatile economy and protect my retirement savings from looming inflation,” Staack explained.
Financial advisers generally counsel patience and adherence to one’s financial plan, especially if it’s well-diversified and goal-oriented. But for someone like Staack, whose investments need to last him through retirement, the recent market volatility is unsettling. He now questions the safety of index funds for retirees or those nearing retirement, who lack the luxury of waiting out market downturns.
“With actions by Trump and Musk, it feels like nothing is secure,” Staack commented. Living in Poway, California, he shifted his political support from Republican to Democrat post-2016.
Wall Street has turned increasingly pessimistic, marked by the S&P 500’s 10.1% drop as trade war fears and potential federal layoffs stirred anxiety about economic slowdowns. This drop highlights the challenges of sustaining a prolonged bull market amidst a chaotic political backdrop.
Despite the resulting jitters, many investors are holding steady. Major wealth management firms report that most clients are sticking to their plans. For instance, Vanguard saw just 2.5% of its clients make trades during the year’s largest market dip, with most buying rather than selling equities, according to James Martielli, Vanguard’s head of investment and trading services.
Mark Mirsberger, CEO of Dana Investment Advisors, notes that while there’s a general daze among clients, most feel relatively secure with their current strategies.
Retirees or those close to retirement, though, are more vigilant. Rob Williams of Charles Schwab says they are particularly attuned to market fluctuations. While it might make sense to reduce risk, he cautions against letting political turbulence sway investment decisions.
Siegfried Lodwig, retired for over a decade, maintains about half his savings in stocks through a financial services firm, trusting the market’s historical resilience. He plans to leave his estate to Amherst College but is mindful of potential short-term impacts on his donations.
Andy Smith from Edelman Financial Engines advises clients to stay calm despite unsettling news. Diversified portfolios and sufficient cash reserves for immediate needs help quell anxiety.
While some Americans, like Prasley McNamara, are opting for caution. The single mother withdrew half of her 401(k), incurring tax penalties, to ensure liquidity amidst economic uncertainties. Living in Newington, Connecticut, she juggles responsibilities of impending mortgage and college costs and no longer feels confident in traditional retirement strategies given today’s landscape.
For Alison Greenlaw, economic uncertainty prompted a move from a target date fund to a money market fund, prioritizing stability over growth. Despite advice to ride out the storm, she felt compelled to take action, influenced by mounting economic concerns.
Meanwhile, Stephen Dinan moved his family’s savings, both college funds and retirement accounts, into bonds and international equities, wary of Trump’s unpredictable policies. Preferring stability, he hopes to reinvest in stocks when economic clarity returns or political shifts occur.
Many investors focus on tactical moves amidst a shaken landscape, seeking to safeguard their financial future while waiting for equilibrium.
