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Needless to say, President Donald Trump’s first 100 days in office have rattled the stock market. The broader benchmark S&P 500 index fell about 8% during Trump’s first 100 days, marking the index’s worst performance in this time period since the first 100 days of former President Gerald Ford’s presidency in 1974. And truthfully, things could have been worse with the index falling close to 20% from highs made in the second half of February. Trump’s sweeping tariffs caught the market off guard, and things only recovered after Trump announced a 90-day pause. The odds of a recession have increased, and Trump’s tariff saga seems far from over. But if you’re worried about your IRA savings, read this first.
Keeping your poise is paramount
It’s easy to be an investor when the market is rising like it has over the last couple of years. It’s the times of turbulence that will test investors. As Trump tries to transform global trade and bring back higher-paying jobs in sectors like manufacturing to America, while negotiating better trade agreements with other countries, investors are largely operating in the dark. Tariffs have never been this high, and Trump is trying to change decades of trade policy seemingly overnight.
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It’s easy to understand why investors may be panicking, but the reality is that we have been here before. No, I am not talking about tariffs or Trump’s other policies. Rather, I am speaking about times of remarkable uncertainty when it seems like things may never be the same again. Other difficult periods like this include the Great Recession in 2008 when it looked like major banks might fail (in fact, a few did), or the COVID-19 pandemic when it looked like the economy could be shut down for months at a time. In both of those circumstances, many people thought the market wouldn’t recover. They may have been right to think that things would never be the same, but the market has always found its footing.
Historical data has shown that long-term investors who stay invested don’t lose money. According to data from BlackRock, the U.S. stock market has never generated negative returns on a rolling 20-year basis between 1936 and 2024. Since 1972, that number hasn’t been longer than 12 years. In fact, volatility has become the norm in the 21st century. BlackRock found that over the past 20 years up until 2024, the market had an average intra-year drop of almost 15% yet generated positive returns in 75% of those years.
Remember, if you haven’t sold any of your positions in your retirement folder, you haven’t lost anything yet. Data is also very clear that short-term trading is a bad strategy. Using 100 years of data, the British multinational asset manager Schroders found that if you invested for a month, investors would have lost money 40% of the time on an inflation-adjusted basis.
Furthermore, the data shows that the longer you hold investments, the smaller the chance you have of losing money. On a five-year horizon, the chance of losing money is nearly cut in half, while on a 10-year horizon the chances of losing money are 13%.
Think about where you are in your investing journey
Every investor is at a different place in their lives. Some are young and can be more aggressive or wait things out, while others need money sooner. If you can’t wait it out and want to protect the current value of your portfolio, then I’d recommend diversifying into safer assets whether its gold, shorter-term Treasury bonds, or certificates of deposit. Of course, you may want to speak to a financial advisor to discuss your specific situation, but there are alternatives.
However, the data clearly shows that if you can wait for multiple years, your money is likely to be safe and even potentially appreciate.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
