Amid recession fears, Delaware economist weighs in on how stock market panic impacts your money
The stock market has been experiencing a bumpy ride over the last few days. Tuesday saw another sell-off on the benchmark Dow Jones Industrial Average. The S&P 500 also fell again, while the NASDAQ ticked up slightly.
Stocks have now fallen below the level where they were when President Trump took office toward the end of January. Robert Fry, a Delaware-based economist, boiled the current economic challenges down to one thing.
"In three words: uncertainty about tariffs," Fry said. "And because I don't think all tariffs are created equal, in seven words: uncertainty about tariffs on Canada and Mexico."
Fry said, broadly speaking, the American economic picture looks pretty good. He pointed to February's jobs report, which showed the U.S. added 150,000 jobs, and while the unemployment rate ticked up slightly, it remained low. However, he issued a warning.
"We're starting to see little cracks here and there," Fry said.
Specifically, Fry noted his concern about Trump's tariff policy and the rapid flip-flopping of those tariffs when they are in place.
On Tuesday, Mr. Trump said he would not double tariffs on Canadian steel and aluminum imports after he initially threatened to do so in response to Ontario Premier Doug Ford's threat to impose tariffs on electricity sent to the U.S.
Ontario's premier announced earlier Tuesday that he would temporarily suspend those electricity surcharges.
However, Mr. Trump's tariff plans go even further. The president has long touted his plan for what he calls "reciprocal" tariffs on virtually all U.S. trading partners. Mr. Trump has said that whatever other countries charge the U.S., they will charge that same amount.
While the president shrugged off concerns of a possible recession during a White House press conference Tuesday, Fry thinks much of that will depend on what happens on April 2, when those reciprocal tariffs are set to take effect.
"If the tariffs that have been threatened or promised or scheduled go into effect April 2, I will probably sit down and update my forecast and put a recession in it," Fry said. "If President Trump does what he did in his first term and has done in the past, where he extracts some small concessions which he can trumpet as a victory, if he does that and calls off the tariffs, then I think the economy continues to grow and we continue to do just fine."
So, what does all this complex trade and economic data mean for you? Financial advisors say you should not expect to see major changes in the markets until there is less uncertainty.
Mark Luschini, chief investment strategist with Janney Montgomery Scott, isn't overly concerned about people watching their 401(k)s or investments. He sees this as a "corrective" phase for the markets and adds that dips like this aren't uncommon.
"Over the last 30 to 40 years, it's been really atypical to not experience a drawdown of 5% to 10% through the course of any year, regardless of the strength of the economy," Luschini said. "At the moment, the S&P 500 on a year-to-date basis is down about 5%. But from its mid-February peak, it's down almost 9%. And so this is, again, well within the confines of what's been a typical pullback as investors reset their expectations for more uncertainty as we move forward."
Luschini also mentioned an old adage about the stock market: Stocks take "an escalator up and an elevator down." For now, his advice is to stay the course and be patient for at least a few months while things play out in Washington.
He didn't rule out using this as a time to buy low for some investors.
"For patient investors, there's no reason to not consider buying the dip now. Don't necessarily put all your cash in play today," Luschini said. "Have a plan. Put 25% of the dollar you were going to commit to the stock market today, and plan to do it for the next four months."
But Luschini did note that getting rid of the uncertainty from the White House will play a key role going forward.
"Until we get some clarity, particularly as it relates to the imposition of tariffs, in terms of what we know today as well as what could come along in the following weeks and/or months, it's probably going to leave the market a little unsettled," Luschini said.
