Americans are nervous about their investment portfolios, and it’s easy to see why, given escalating trade tensions and gloomy economic forecasts. The probability of a US recession within the next 12 months has jumped to 45% from 25% last month — the highest since December 2023, a recent Reuters poll found. President Donald Trump’s sweeping tariffs, which have sparked a global trade war, have prompted worries about inflation, slower growth and layoffs. Welcome to a “risk-off” environment, a time when investors pull money from volatile assets like stocks and search for safer ground. “Uncertainty couldn’t be any higher right now,” said Douglas Boneparth, a certified financial planner and founder of wealth management firm Bone Fide Wealth. “Imagine being the CFO of a Fortune 100 company trying to plan for the year, let alone multiple years.” But he said investors who aren’t CFOs of multinational corporations don’t need a finance degree to protect their money. They just need a plan. Plan, don’t panic When markets get choppy, it’s tempting to hit the panic button. But financial experts say the smartest move you can make is pause — and plan. “Short-term volatility is part of the game,” Boneparth said. “The worst thing you can do is sell at the bottom or make an emotional decision that sets you back for years.” In other words: Pulling your money out during a downturn can lock in losses, and you may miss the market’s biggest recovery days, which often drive long-term gains. Catherine Valega, a certified financial planner with Green Bee Advisory in Boston, agrees with taking a moment to think things through. She suggests that investors work with financial advisors who can help with their long-term plans. “I like to say we set the guardrails, like a GPS for their financial life,” she said. She also recommends continuing to invest, especially for people who work and have 401(k)s. For those without a 401(k), you can set up automated investments, Valega said. What’s ‘safe’ depends on the investor In shaky markets, many investors turn to cash equivalents — think high-yield savings accounts, US Treasury bills, money market funds or CDs. These are typically insured or backed by the government, offering peace of mind. “Cash gives you flexibility and control,” Boneparth said. “But going all to cash out of fear? That’s often the worst move.” Fixed-income investments like bonds are another option, though Boneparth cautions that some have significant risk. Even the S&P 500, which is often seen as a solid long-term investment, comes with risk. “Warren Buffett says to invest in the S&P 500, but he also says to do it for 10 years or more,” Boneparth noted. “Risk and reward go hand in hand.” How to de-risk without pulling out completely If investors are feeling uneasy, there are ways to reduce risk without abandoning the market entirely. Start by building a solid cash reserve, ideally at least three to six months of living expenses. “That gives you the cushion to handle emergencies or opportunities without touching your investments,” Boneparth said. Once investors have built up a large enough cash reserve, it’s smart to diversify, Valega said. US Treasury bills, money market accounts or other low-risk cash alternatives can help spread out risk without compromising safety, though again investors don’t have to put all their money here. Another smart move? Rebalancing your portfolio. That means adjusting your mix of stocks, bonds and cash to realign with your goals and risk tolerance. For some, that could mean taking advantage of discounted stock prices to buy more — what some investors call “buying the dip.” Bottom line No one can predict when markets rise or fall. What matters most is staying consistent and disciplined, Boneparth said. “Investing isn’t about picking the perfect stock,” he said. “It’s about doing the boring stuff consistently over a long period of time. That’s what makes it hard.” In rocky markets, that kind of calm and measured approach might be your greatest asset.
How to protect your money when markets get rocky
TruthLens AI Suggested Headline:
"Strategies for Safeguarding Investments Amid Economic Uncertainty"
CNN
8.6
TruthLens AI Summary
In light of rising concerns over investment portfolios, many Americans are apprehensive about the state of the economy, particularly due to escalating trade tensions and gloomy forecasts. A recent Reuters poll indicates that the likelihood of a U.S. recession within the next year has surged to 45%, a significant increase from the previous month's 25%. This uncertainty is exacerbated by President Trump's tariffs, which have triggered a global trade war, raising fears of inflation, slower growth, and potential layoffs. Douglas Boneparth, a certified financial planner, emphasizes the need for a strategic approach during these turbulent times, urging investors to adopt a plan rather than succumb to panic. He warns against the pitfalls of making emotional decisions, such as selling investments during downturns, which can lock in losses and prevent benefiting from eventual market recoveries. Financial experts advocate for investors to take a moment to reassess their strategies and potentially seek guidance from advisors to navigate the complexities of their financial futures.
To mitigate risks without completely exiting the market, experts suggest establishing a cash reserve that covers at least three to six months of living expenses. This financial buffer allows individuals to manage emergencies or capitalize on opportunities without disrupting their investment strategies. Additionally, diversifying investments into safer assets, such as U.S. Treasury bills or money market accounts, can help spread risk effectively. Rebalancing portfolios to align with personal goals and risk tolerance is also recommended, which may involve purchasing stocks at discounted prices during market dips. Ultimately, the key to successful investing in uncertain times lies in maintaining discipline and consistency rather than attempting to predict market fluctuations. As Boneparth aptly notes, investing is about adhering to a steady plan over the long term rather than chasing after short-term gains, making it crucial to focus on the fundamentals that drive financial success.
TruthLens AI Analysis
The article highlights the anxiety among American investors regarding their portfolios amid rising trade tensions and economic uncertainties, particularly with an increased likelihood of a recession. It emphasizes the importance of strategic planning over impulsive decision-making during volatile market conditions.
Investor Sentiment and Economic Context
The current atmosphere is characterized by fear and uncertainty, as reflected in the statistics that show a significant rise in recession probability. The mention of President Trump's tariffs indicates a direct link between political decisions and market reactions, suggesting that economic instability is influenced by external factors beyond individual control.
Advice for Investors
Experts like Douglas Boneparth and Catherine Valega stress the importance of remaining calm and developing a financial plan rather than succumbing to panic. This advice is practical, aiming to empower regular investors rather than just corporate CFOs. The suggestion to continue investing, particularly through automated systems, promotes a long-term perspective rather than short-term reactions.
Underlying Messages
The article subtly conveys a message that while the market may be unstable, there are proactive steps that individuals can take to safeguard their investments. It encourages readers to seek professional guidance and maintain their investment routines, which could mitigate losses in the long term.
Potential Manipulation
While the article provides useful advice, one might consider whether the emphasis on panic avoidance could serve to downplay legitimate concerns about market volatility. This could contribute to a narrative aimed at stabilizing investor sentiment, possibly minimizing fear that could lead to broader economic repercussions.
Comparative Context
When examining this piece alongside other financial news, it stands to reason that there is a concerted effort in media to instill confidence in markets, especially during tumultuous times. News outlets often oscillate between alarmist headlines and reassuring advice, reflecting the dual nature of investor psychology.
Broader Implications
The potential consequences of this article on society, economy, and politics include a reinvigoration of investor confidence or, conversely, a continued wariness that could affect market performance. The focus on strategic planning may resonate more with middle-class investors who participate in 401(k) plans or automated investment strategies.
Impact on Financial Markets
The advice given could lead to sustained investment in certain stocks, particularly those in defensive sectors or those perceived as stable during downturns. This could influence market dynamics where investors are more likely to gravitate towards safer assets.
Global Relevance
In the context of global power dynamics, the article reflects the interconnectedness of U.S. economic policies and global markets. The current political climate and trade tensions can have ripple effects that extend beyond national borders, impacting international markets and investments.
Use of AI in Article Composition
There is a possibility that AI could have been utilized in crafting this article, particularly in structuring the advice and presenting statistical data. AI models could assist in analyzing market trends and investor behavior, thus shaping the narrative to encourage strategic planning over panic.
Ultimately, this article serves to provide a balanced perspective on navigating financial uncertainty while promoting a message of resilience and long-term planning. Its reliability hinges on the accuracy of the presented statistics and expert opinions, which appear credible in the current economic climate.