How to Respond to the Latest Market Drop
Gary Cohn stepped down as chief economic adviser to President Donald Trump on proposed steel and aluminum tariffs , causing the Dow to plunge 300 points on Wednesday.
Why are the markets scared? As Cohn’s departure “signals that the Trump administration is absolutely committed to pushing tariffs and the risk of a trade war is now greater,” Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, told CNN Money .
So what do you need to do right now? No one can time the market and no one knows what will happen. But the market is bigger than Gary Cohn. So when I say what I say every time the market moves:
Think long term
“Make investments regularly, maybe monthly or weekly,” says Lou Haverty, a certified financial analyst . “By making small but regular contributions, you can invest in any market conditions. So in hindsight, you will benefit from investing after market adjustments. “
Understand that this is normal, even if it hasn’t been for almost the last decade. “People kind of forget what a recession is,” Scott Hanson, co-founder and senior partner of Hanson McClain Advisors, told CNBC . “It is prudent to be ready for one.”
Buy
“The market is disappointed right now, but no player is going to change the outlook for the economy,” Doug Kot, chief market strategist at Voya Investment Management, told Marketwatch . “I would say the market is overreacting and I would buy the fall.”
“Set up a monthly recurring ETF or diversified portfolio investment to ensure you buy in the downturn and make a profit on the other side,” suggests Evan Tarver, financial analyst at Fit Small Business .
Check your 401 (k)
If, say, you are five to ten years away from retirement, you “should consider becoming more defensive,” says Michael Dinich, retirement planner at Your Money Matters.
“At this stage, it is more important not to lose money than to get the maximum possible profit,” says Dinikh. “If your retirement / investment success depends on ‘aiming for the fence’ and hitting houses all the time, the plan is unlikely to succeed.” He advises people close to retirement to pay attention to indexed and variable annuities. You will want to check the fees, which can be high, and consider if the price is worth the potential benefit.
And focus on things you can control, such as building up cash savings or learning new skills for an in-demand career that can help you in the event of a bear market.