Weekend Shocks from Tariffs: This weekend, President Trump imposed 25% tariffs on imports from Mexico and Canada, as well as 10% tariffs on goods from China. Wall Street reacted negatively today, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all opening significantly lower.
Fortunately, tariffs on Mexico have been temporarily paused for one month after discussions between Trump and Mexican President Claudia Sheinbaum today. As markets begin to rebound from earlier losses, it’s a potent reminder of the volatility that exists in trading.
To help investors navigate these challenging times, I’m sharing insights from InvestorPlace CEO Brian Hunt, who provides valuable guidance on what actions to take and, more crucially, what to avoid during market downturns.
Hello, Reader.
It’s tough to stay grounded when the stock market experiences large drops, pulling your portfolio’s value down in the process. Emotional strain can lead to poor decision-making during such stressful periods.
- What about my retirement…?
- My kid’s college education…?
- My dreams of financial independence…?
During these tumultuous times, it’s essential to know what steps to take and what mistakes to avoid. A historical perspective on one of the most significant business success stories of the last century—Amazon.com Inc. (AMZN)—can be instructive.
Many would recognize Amazon as a stock market standout of the past century. Starting as a small online bookseller, it has transformed into one of the world’s most significant companies. In 2020, Amazon’s market value reached $1 trillion, and it currently stands at an impressive $2.5 trillion.
Since its IPO in 1997, Amazon’s market value has skyrocketed over 120,000%. An investment of $10,000 would have blossomed into a staggering $12 million today.
Much of Amazon’s success stems from its Prime membership program, efficient logistics that reduce costs, and a thriving cloud computing business generating billions in revenue.
Interestingly, you probably don’t recall what the Dow Jones Industrial Average was doing on specific dates during Amazon’s rise, nor mortgage rates on particular days. These fluctuations have proven inconsequential compared to Amazon’s business achievements.
While recessions and market corrections made headlines, they were merely speedbumps on Amazon’s road to success. The key factors for Amazon shareholders were not market trends or interest rates, but its ability to innovate, provide value, and outperform its competition.
The same principles apply to other successful companies: Apple Inc. (AAPL), The Walt Disney Co. (DIS), Starbucks Corp. (SBUX), and Alphabet Inc. (GOOGL). Their rises occurred despite market fluctuations and economic challenges.
This is vital information for you as an investor. If you’re investing for the long term, expect to endure bear markets, recessions, and corrections. These declines can be alarming and may make you doubt your investment strategy.
Bearish predictions are rampant in the media, with countless analysts foreseeing doom and gloom scenarios, including economic downturns and inflation crises.
Humans are naturally attuned to threats, a trait passed down from our ancestors. Whereas ancient dangers lurked in the wilderness, today’s fears often manifest from headlines that sell based on fear.
Common sense and factual data should guide your investment strategy instead. This approach will lead to greater success over time.
Consider this: over the past century, the stock market has averaged a positive annual return of 10%. This trend stems from the robust growth driven by free markets and enterprise.
Additionally, during the 20th century, U.S. stocks increased in value by an astounding 1,500,000%. This means that an investment of $100 would have turned into $1.5 million.
Despite numerous wars, recessions, and significant economic challenges throughout the century—or perhaps because of them—innovative companies like The Coca-Cola Co. (KO), Ford Motor Co. (F), Hershey Co. (HSY), Intel Corp. (INTC), and General Electric Co. (GE) created incredible wealth.
Understanding Market Volatility: Insights and Strategies for Investors
McDonald’s Corp. (MCD), The Procter & Gamble Co. (PG), Tootsie Roll Industries Inc. (TR), Pfizer Inc. (PFE), Walmart Inc. (WMT), Starbucks, and many others are facing challenges amidst concerns about debt, poverty, and inequality in America.
These issues dominate the news cycle, fuel bestselling books, and can leave many feeling anxious.
However, understanding history and recognizing the strength of American innovation provides reason to remain hopeful rather than sell off investments.
— Brian Hunt, CEO of InvestorPlace
In challenging times, it’s useful to remember this sentiment and refer back to it. Thanks, Brian, for the reassurance.
As we look forward to the upcoming week, let’s recap our recent discussions on Smart Money.
Smart Money Roundup
Preparing for AI Innovations: Challenges and Opportunities
The release of the DeepSeek R1, a new large language model from China, signals significant changes ahead for both investments and job markets. Thomas Yeung discusses strategies to navigate these technological advancements.
China’s New AI: Potential for Big Investment Gains
With the global launch of DeepSeek R1, the market reacted sharply this week. Earlier discussions with InvestorPlace Editor in Chief Luis Hernandez and AI Revolution Portfolio partners, including Louis Navellier and Luke Lango, explored how to strategize our AI investments in light of this news.
Strategies for Withstanding Market Volatility
Understanding the unpredictable nature of stock movements can help you navigate market ups and downs. A long-term investment strategy can often provide greater security. I have a specific trading strategy that aims to capitalize on these long-term trends.
Looking Forward
Tomorrow’s Fry’s Investment Report will focus on Trump’s tariffs. To stay informed on important updates, join our membership here. We will monitor the situation closely and advise on any necessary actions.
Best regards,
Eric Fry
Editor, Smart Money
Frequently Asked Questions (FAQs)
1. How do tariffs affect the stock market?
Tariffs influence businesses by increasing costs and creating uncertainty, which can lead to stock market declines, reminiscent of past tariff announcements regarding Mexico, Canada, and China.
2. Should I sell my stocks during a market downturn caused by tariffs?
No. Panic selling can lead to significant losses. History shows that sticking with innovative companies like Amazon proves beneficial in the long run, despite short-term fluctuations.
Focus on long-term stability. Invest in companies with strong fundamentals and a commitment to innovation, rather than reacting to the latest headlines.
4. Do market dips and alarming news really impact long-term investors?
Generally, the daily fluctuations—be it stock market drops, interest rate changes, or political events—are less significant over time. Prioritizing investments in innovative companies that adapt to trends is key.
5. Has the stock market ever thrived during economic crises?
Yes. The U.S. stock market increased dramatically, even in the face of wars and recessions, showcasing a rise of 1,500,000% in the 20th century. Successful companies like Amazon, Apple, and Starbucks thrived by focusing on innovation and delivering value.
The post Here’s What NOT to Do the Next Time Tariffs Hit appeared first on InvestorPlace.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
