As I write this, the stock market is in an absolute free fall as a result of Trump’s tariffs, and I’m NOT happy with it.
If you are anything like me, than watching your portfolio get decimated on a daily basis for no reason other than the fact that our “President” has a hard on for tariffs is quite stress-inducing. My plans for early retirement seem to be flying out the window with each minute that passes while the stock market is open.
This is the exact time that many people make life altering decisions – decision that could make or break your financial future.
With that in mind, here are three things that you should be doing right now to keep your investments in check.
What to Do When the Market is in Free Fall Thanks to Trump’s Tariffs
First things first.
We need to keep a level head when the market is falling like it has been this first week of April, 2025.
The market is falling NOT because of a global pandemic or because of an overheated real estate bubble or a banking crisis.
Nope, the market is crashing for one reason and one reason only – Donald J. Trump.
His administration is causing chaos and putting tariffs in place as if they were gift baskets at a 5 year old’s birthday party.
The predictable result is that the markets are crashing, just like they did in 1930 as a result of the Smoot Hawley Act.
But just like the market rebounded and continued marching up and to the right after the Great Depression ended, the market will rebound from this event as well. The only question is how long will it take for that to happen.
And the answer to that question is simple – nobody knows.
So here are some things you should and shouldn’t be doing as the market enters uncertain territory.
1. Don’t Sell!
First off, if you are invested in the market and you have watched your portfolio plummet in the past few months (or days) as I have, now is NOT the time to sell.
As much as we would like to believe otherwise, nobody can predict market patterns. Nobody knows what the next piece of good (of bad) news will be that will send the markets back up or continue to tear them down.
Nobody can predict the market bottom, and those that try are usually wrong.
JL Collins, author of “The Simple Path to Wealth” frequently tells the story of how he got spooked in the months following the 1987 market crash and sold all of his stock holdings. As he tells it, when he sold the stock market was either at the bottom or very close to it. It took him a year to regain his nerve and jump back into the market. By then, stocks had surpassed their pre-Black Monday highs.
By selling at the bottom and waiting to get back in, Mr. Collins effectively locked in his losses and paid a premium to get back in the game.
Don’t make that mistake.
I’m not going to lie. I’m nervous right now. But I’m not selling. I’m not going to cash.
At some point all the sellers will finish selling, leaving only investors who are purchasing stocks on sale. And when that happens, the market will start its slow climb back up and to the right.
The market will come back – it always does. So don’t sell.
2. Cut your discretionary spending
But staying invested is only one thing you can do to protect yourself in a bear market. Cutting your discretionary spending is another thing you can do.
Why cut discretionary spending?
Whether you work at a W-2 job or run your own business, the market is uncertain right now and having cash on hand is extremely important.
If you were thinking about a costly home improvement project this summer, now might be the time to hold off.
Or if you were about to book an expensive vacation – take a minute to think about whether it is absolutely necessary.
When a recession is near, companies decrease spending and lay off workers.
This means that if you work for a company, your job may not be safe. If you run your own business, you may notice that revenue is starting to drop.
The more cash you have on hand, the better situated you will be if your income source dries up.
Of course, if you are already FIRE, then now is the time to cut your spending in the event your portfolio takes a major hit.
My favorite tool to track my own personal spending is Monarch Money. Use this link for an extended 30 day trial when you sign up!
Which leads us to my third recommendation…
3. Build up your emergency fund
At the same time you are cutting your spending, you need to be building up your war chest, so to speak.
Many “gurus” recommend having 3-6 months of living expenses in your savings account.
When we are staring at a potential recession this year, i would recommend 9-12 months at a minimum.
if you lose your job and are out of work for a prolonged period, the financial cushion that a 12 months war chest provides could mean the difference between selling your stocks at a discount to pay living expenses and weathering this storm so that you can come out on the other side relatively unscathed.
4. Try not to panic and re-read #1
Remember, market declines are a fact of life. They happen fairly regularly and this current market decline is not the last decline we will experience.
What is important is that you stay the course, remember that living through these rough patches is just a part of life, and don’t sell when you are at your most fearful.
If you feel yourself getting nervous and wanting to sell, go back and read this post. Or better yet, just stop checking your portfolio balance. This is not easy to do, but staying calm in the face of market turbulence is how you will win in the long term.
