The first 100 days of the second Trump administration upended a lot of things — not least of which was what investors, businesses and consumers thought they knew about the US economy.
As a result of President Donald Trump’s punitive tariffs regime, economists across the ideological spectrum say the breadth and scope of the tariffs are likely to throw the US economy into reverse and harm Americans financially.
The latest economic data suggests the economy is indeed weakening, though not yet under water. The annualized rate of economic growth took a nosedive in the first quarter, mostly due to a surge in imports ahead of tariffs taking effect. But the so-called “core” growth rate, a gauge of underlying demand in the economy, rose slightly.
Consumer spending slowed in the first quarter overall but soared in March as Americans hoped to get ahead of the tariffs. And government spending fell sharply. Meanwhile, first-quarter inflation accelerated, even though it cooled somewhat in the month of March. And private-sector employers added far fewer jobs in April than expected, according to data from payroll processor ADP.
Then of course, there were big downward swings in stocks in March and April. The US stock market turned in its worst performance for the first 100 days of any presidential term in more than half a century.
So, how can a normal, busy, not-in-charge-of-the-world person financially protect themselves in the midst of all the churn?
Here are some top suggestions drawn from several stories we’ve done in recent weeks that may help you feel a little more financially secure in the months ahead — and less at the mercy of the markets, Trump’s policies and geopolitics.
You can’t prevent negative events in life, but you can control how you respond to them (at least somewhat).
For instance, you can’t know for sure whether there will be a recession or if you’ll be laid off. But you can make a plan for how to handle such worst-case scenarios, which can reduce your stress if they occur.
Consider your income sources. If you’re laid off, will you get severance and unemployment benefits? (To get an idea of how much you’ll receive and when, check your employer’s severance policy and your state’s labor department site.)
And do you have a skill or side gig that can earn you money between jobs? If so, what can you do now to make that a realistic possibility should the time come?
Arrange for financial backstops. Where can you get cash quickly if you need it? Ideally you’d want an emergency fund with three to six months of living expenses if you’re single, or nine to 12 months if you’re the primary breadwinner for your family or have very high expenses.
If you don’t have that much set aside and can’t save more now, you might take out a home-equity line of credit if you own your home, since you could tap that in an emergency.
Another lever you can pull is spending. Get a clear sense of how much you spend currently on needs (e.g., housing, food and health insurance) versus wants (e.g., entertainment and other regular discretionary purchases, etc.). Doing so will provide a roadmap of how you can cut back if you must.
(More ideas here.)
You can’t avoid losses altogether when there are major stock downturns. But you can minimize them by having a diversified portfolio of stocks and bonds, which will be far less volatile and risky than an all-stocks portfolio. But also:
Keep perspective: There will be a lot of stock downturns over the course of your life. If you have 20-plus years until you will need money from your portfolio, big drops can be buying opportunities since stocks become cheaper.
For any money you will need in less than five years, invest that portion more conservatively — in short-term Treasuries, money market funds or FDIC-insured certificates of deposit.
If you’re in or near retirement, have one to two years’ worth of living expenses invested in high-yield savings accounts — or cash-equivalent assets like short-term bonds — so you will never have to make withdrawals from your portfolio when stocks are down.
Don’t run to cash: The last thing you want to do in a big downturn is liquidate all your holdings and go to cash. That’s because you will: A) lock in your losses; and B) compromise your nest egg’s chances of growing sufficiently because no one is good at calling the “bottom” of the market, meaning you won’t know when to “get back in.” So chances are you will miss at least part of the recovery when it occurs.
Look abroad for a little bump: This year, for the first time in many years, non-US stocks have outperformed US stocks because their valuations are lower and there has been heightened concern about US policies.
If you’re in a target date fund, you may already have exposure to world markets. But if you’re not, you may want to consider investing up to a third of your stock allocation in a low-cost world markets ex-US index fund. So if you have a portfolio of 60% stocks and 40% bonds, allocate up to 20% (one third of 60%) in international equities and put the rest in US stocks.
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