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I spend a lot of my free time reading, especially newspapers, which may seem odd to you given the dramatic drop in newspaper subscriptions over the years. I subscribe to three digital newspapers, and their breaking news alerts—which find their way into my email account—keep me busy.
Lately, I’ve been bombarded with news about tariffs and the recent stock market decline. I have no idea how long this economic turmoil will last, and from what I’ve read, neither does anyone else. But here are three observations from the news that have caught my attention:
Don’t Panic: Ron Lieber points out in his New York Times article that the time to panic about how the new tariff policy will affect prices and the stock market might be when Costco raises the price of its $1.50 hot dog-and-soda combo. The price hasn’t risen since 1985, and Costco’s chief financial officer has suggested they will never raise it.
It Might Take a While: Edward Yardeni, President of Yardeni Research and successful at picking market bottoms, said that this usually happens after the Federal Reserve has taken action. But Jerome Powell, the Fed chair, has made it clear the central bank won’t intervene anytime soon until it understands the tariffs’ effects on the economy.
Don’t Miss Out: Diane Harris gives these eye-popping statistics in her column: “If you missed the 10 best days over the 20 years from 2005 to 2024, you would have reduced your returns by more than 40 percent, according to J.P. Morgan; If you missed 30 of the best days out of the roughly 5,000 trading days during that period, you’d have lost money, after inflation.”
Maybe the takeaway from these comments is that it’s best to sit tight and not panic. It might take a while for the stock market to bottom, but we could risk losing out on some of the best days to invest if we exit the market. We also don’t know how other countries will react to the tariffs, and perhaps the President will reverse course.
Rachel and I are going to continue doing what we’ve always thought was best for our money by following these simple rules:
Rebalance: When our preferred asset allocation shifts more than 5%, we will rebalance our portfolio. This way, our level of risk and return won’t stray.
Maintain Our Health: We’ll continue taking our morning walks, performing weight-bearing exercises, and eating a healthy diet because failing health and the cost of long-term care are greater risks to our investment portfolio than what is currently going on in the stock market.
Reduce Spending: We’re still planning on taking a couple of major trips this year. But if the economy ever gets extremely dicey, we would dramatically reduce our spending. That wouldn’t be hard to do because we’ve lived a fairly frugal lifestyle most of our lives, so we can have a comfortable retirement.
Thank you for this post. I really feel better.
Dennis, I want to thank you for this thoughtful article and the substantive research you compiled from your thorough reading and translation of events. Your overview neither lends conjecture to the outcome of the tariff problems nor lays blame, or disrespects the office of the President of the United States.
You present a far finer version of what we can do, within our limits, to make our lives more peaceful and the news more palatable— while coping with these precarious problems which are gripping the uncertainty and continued roiling of the markets.
You raise the bar for writing in the Humble Dollar community. Thankful for your lack of condemnation. The ham-handed comments offered by others pale in comparison to your commentary.
A pleasure to read your cogent assessment of events, as they apply to all clear.thinking Americans.
Marjorie,
Thanks for the kind words.
We’re still planning on taking a couple of major trips this year. But if the economy ever gets extremely dicey, we would dramatically reduce our spending.
Why?
If the economy were to get to a point where tariffs caused prices to rise considerably, it wouldn’t make sense to purchase goods at artificially inflated prices. Like most Americans, we would reduce our spending.
I don’t get that. Are you going on vacation and bringing back that much?
You misunderstood my comment. When I wrote the word “place,” I didn’t mean a vacation destination. We have no plans to cancel our vacations, and no plans right now to reduce our spending. I’ll edited my comment to try to make it clearer.
In Diane Harris’s column, that I referenced in the Forum post, she wrote: “Gains historically have come in unpredictable spurts, and the biggest advances often come within days of the worst declines.” That’s what we saw Wednesday, with the stock market surging.
I’m sure it’s best to sit tight given there is no viable alternative. I suggest these are not normal times and examples from the past won’t help much. This is not the normal gyrations of the markets.
I agree, this one is 100% self inflicted, but still what to do that isn’t market timing?
i too, love the printed word. i subscribe to the online as well because i
enjoy the back and forth of the online comments section. ”that’s where
the real information is.”
i cashed out of the market when my wife died. more than enuf $.
immediate family all gone and we were childless by choice. dog and i are headed to off grid wv acreage soon. insurances all paid up and going with
a group of, ”like minded friends”. a southern galt’s gulch, if you will. i was tired of the roller coaster 8 years ago; even more so now. good luck to you all…
Sorry to hear about your wife’s passing. Nowadays, it seems that mostly older folks like reading the newspaper. The younger people get their news from other sources.
When I was in the third grade, my mother worked at a small diner, within walking distance of our house. Every morning, I would walk there to have breakfast before going to school. I always read the sports section of the diner’s newspaper to see how my favorite sports teams were doing. That’s how I got started reading the newspaper. Of course, now I read more than the sports section.
Having grown up a huge sports fan in NH when I attended the University of Vermont I would read the Boston Globe sports page every night in the library before I started my studies. It was a nice distraction.
Tariffs are paid by importers.
The US no longer has the manufacturing infrastructure to make many products, at any kind of competitive price.
Americans can make $20-25/hour+ at Amazon vs a manufacturer trying to compete with China paying $.30/hour. That dog don’t hunt.
Where are all the workers going to come from when we’re deporting like crazy?
No American-based car company can compete with BYD.
And let’s assume we build all that manufacturing infrastructure back at whatever hundreds of billions of dollars of investment that would take. Does that mean we can ease tariffs after that? Probably not because the second it looks like those restrictions are lifting the companies will logically dump every factory in the US because it doesn’t make any sense to manufacturer goods more expensively here than somewhere else. Frankly it’s just incredibly wasteful to bring those jobs back here, because there’s zero economic necessity, and it makes less sense (money) here than in other places.
Yes, ever-changing tax laws make it difficult to make good business decisions. I believe there are economic reasons and national security necessities (substandard steel and computer chips) for investing in manufacturing in the U.S. There has been an increased use of robotics in the automotive and electrical industries. Ford and Tesla are committed to investing in more automation, robots, and ‘cobots’ to reduce costs. The logistics cost less because we don’t have to ship raw materials overseas and ship the final product back.
Yes but the raw materials are more expensive, which more than makes up for that shipping cost. Also, Ford and Tesla are relatively small parts of of the manufacturing economy, and Ford already shot themselves in the foot by discontinuing practically sized cars and going all in on oversized trucks. As for Tesla… Yuck 🤮 Additionally robots do not produce jobs, they take them away. Those manufacturing jobs will barely increase I’m sure if it’s just more cost effective to use robots and other machines.
The U.S. is the most innovative country in the world. We need to get back to a more balanced economic model where we are less dependent on foreign companies. The top three components in cost of goods are raw materials, labor, and energy. While we can’t compete on labor, we can compete on the other two and perhaps using AI and more robotics instead of or in addition to manual labor. Also, there could be short-term tax incentives. I’m ready to invest in ‘made in U.S.A’.
In a capitalist system, capital flows to the most profitable enterprises regardless of national boundaries. Innovative talents need a well-endowed environment to thrive. The US may be the most innovative country in the world, but the most popular careers chosen by the US Ivy League graduates are finance, consulting, law, healthcare which pay well. Not many chose manufacturing engineering and far fewer chose education. In fact, the US is the leading service exporter worldwide, with a surplus of 24 B in February (per the capitalspectator.com).
Since less than 40% of the US high school graduates complete a bachelor’s degree, and our vocational programs have seen budget reduction, more manufacturing factories would see a shortage of skilled workers. It was reported that the new TSMC’s Arizona factory could not find enough workers for the 6000 job listings. Foreign-born workers in California (the majorities of engineers employed by tech companies) are considering leaving the US due to concern about the safety of their families, especially after the current US administration tells Congress to repeal the CHIPS and Science Act.
I am a proud donor to the UC Berkeley Engineering Department, but I could not advise my niece or nephew to pursue an engineering career while their engineer father and mother experienced layoff every few years (the US tech companies prefer young Visa-holder engineers to work long hours for lower wages in hope of the Residency green card).
I was laid off for the same reason. American workers aren’t always protected by H1B Visa laws.
When I graduated back in the 70s, it was expected to have manufacturing experience on your resume. Now decades later with the decline in manufacturing, not so much, if at all. Kinda of a catch-22. If there are fewer manufacturing jobs, why choose manufacturing engineering.
Our single country has a higher GDP than the entire European union, but WE are the ones experiencing imbalance in the world economic model? Luckily these tariffs and this nascent trade war will help shift the balance in favor of other countries/regions, like the EU and China.
“I have no idea how long this economic turmoil will last, and from what I’ve read, neither does anyone else. “
One thing I keep in mind is the participation [or] lack thereof by Americans in the stock market. Those who are not participating or are to only a slight degree may have a different perspective than I do. This alludes to the resilience of Americans in general, rather than the perceptions of the American investor.
I recently noted elsewhere that according to a recent Gallup poll “the share of Americans who are invested in the stock market [in 2024] climbed to the highest level since 2008.”
That poll indicated that 75% of those earning $40,000 or less do not own stocks. While stock ownership may seem to be widespread, there are a lot of Americans who don’t and have not been able to participate in the recent rise in the value of assets. Overall, about 62% do own some stock, about the same as pre-pandemic levels. Gallup noted this “because the wealthy tend to have larger portfolios than lower-income investors, it can be assumed that the real distribution of stock market gains is even more extreme than that.”
It may be reasonable to assume that stock market losses will be similarly distributed and that sentiments expressed accordingly.
I have to wonder if this number includes those Americans who are INDIRECTLY invested in the stock market through their pension or profit sharing plans.
The Gallup poll survey question is: Do you, personally, or jointly with a spouse, have any money invested in the stock market right now — either in an individual stock, a stock mutual fund, or in a self-directed 401(k) or IRA?
You make a good point about the percentage of folks who stocks. I heard as low as 50% of Americans own stocks. The other 50% have not felt the effects of these tariffs yet, and as you said, they may have a different opinion.
In addition to a rate cut from the Federal Reserve, I imagine three things might spur a stock-market rebound: 1) the administration changes course on tariffs; 2) the start of global negotiations on tariffs; and 3) signs that the U.S. economy is proving surprisingly resilient.
Jonathan, the stock market will certainly recover at some point, but I seriously doubt that our fruitful economic relationship with the world at large ever will. Jonathan V. Last wrote a few days ago that even if the administration does change course somehow, it won’t matter in the long run. Our allies and partners have learned that America is no longer to be counted on, and that they must move forward without us. I was struck by this comment from the new Canadian Prime Minister, Mark Carney:
“The eighty-year period when the United States embraced the mantle of global economic leadership—when it forged alliances rooted in trust and mutual respect, and championed the free and open exchange of good and services—is over. While this is a tragedy, it is also the new reality.”
I worked in Brussel, Belgium for a year back in the mid 70s. I went to lunch daily with a number of the locals and some from England. They didn’t speak well of Americans. One time I asked if the US involvement in WWII meant anything. Their response was ‘that was then.’ I was quiet for a bit and then asked, if they were attacked would they want Americans to fight with them. Their response was ‘yes’.
The administration changing course would seem to be the fastest way to get the economy and stock market back on track. Yesterday, there was an unfounded rumor that the tariffs were going to be put on hold for a 90-day period, and the markets surged.