US Markets Decline After Trump Refuses To Rule Out Recession Fears: Here's What Advisers Want Investors To Do

US President Donald Trump's tariff plans and refusal to rule out an economic downturn prolonged the ongoing volatility in US stock markets. 'Look, we're going to have disruption, but we're OK with that,' he said earlier this week on the Fox News show' Sunday Morning Futures.'

These developments took a toll on investor confidence, reflected in the Dow Jones index, which slid by almost 500 points yesterday or 1,400 points in the past two days. Meanwhile, the S&P 500 has declined by 3.62% in the past week to 5,572. At one point, the benchmark index was down 10% from its peak. Furthermore, the Nasdaq Composite tanked by 4% on Monday, marking the worst day since September 2022.

Investors are concerned about dynamic trade policies, elevated inflation, and uncertainty over the US Federal Reserve's plans for interest-rate easing.

'What Trump has been doing has not been helpful for US equity markets,' said Neil Dutta of Renaissance Macro Research. 'For now, I don't see a recession. We've never really had a recession from policy uncertainty itself. And, we don't yet know how markets would respond if Trump's escalation now results in de-escalation later.'

Market participants are also waiting for the February US inflation report today. Bloomberg estimated that the consumer price index (CPI), excluding food and energy, would rise 0.3% for February, keeping annual price growth elevated.

'There's just an enormous amount of uncertainty around the economy right now as we watch the early days of the new administration play out,' said Matt Schulz, chief credit analyst at LendingTree. 'People don't have any idea what things will look like in three to six months, and that's really unnerving.'

Avoid Panic Selling

Many investors sell their assets during a market crash, making irreversible emotional trades that impact their long-term financial goals. However, Bone Fide Wealth president and CFP Douglas Boneparth said that long-term investors should know that 'volatility is part of the game,' adding that investors are 'seeing the market more or less whiplash' based on what Trump says every other day.

He urged investors to focus on what they can control, such as reassessing portfolio allocations, revisiting investing strategies, controlling impulsive feelings, and concentrating on improving their ability to stay the course.

Meanwhile, Oaktree Financial Advisors co-founder Ed Snyder asked investors to avoid letting their 'emotions wreck' their investments. He explained that advisers develop portfolios by leveraging years of experience and intuition while keeping in mind the client's risk tolerance and life goals. Snyder added that if one's investment goals haven't changed, there is no need to react to stock market fluctuations.

Maintain A Cash Reserve

Boneparth suggested that investors should try to maintain cash reserves for six to nine months of living expenses in case of emergencies or any surprise market opportunities that may arise after an economic upheaval. 'Nothing helps navigate rough markets like having a healthy margin of safety,' he said.

The adviser added that the 'silver lining' to stock market dips is that investors could find 'quality companies or indices at discounted prices' and use part of the cash reserves to invest.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.