What If Tariffs Continue To Cause Stock Market Volatility Over the Next 4 Years? 4 Ways Investors Can Prepare
Written by
Vance Cariaga
Edited by
Amber Barkley
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There’s nothing unusual about stock market volatility, though it’s typically tied to some trend or event that investors eventually learn how to manage. But even the most seasoned investors have a hard time figuring out how to react to the extreme ups and downs that have plagued Wall Street in recent weeks.
This month alone, the stock markets have experienced historic gains and losses — often in back-to-back sessions — as investors try to get their arms around President Donald Trump’s tariff plans. When Trump ramps up the tariff plans, the markets tend to collapse. When he hints about backing off those plans, the markets soar.
Neither scenario is ideal, because both reflect uncertainty — and there is nothing that rattles Wall Street’s nerves more than uncertainty.
Some investors fear Trump will continue to play the tariff card throughout his four-year term. If so, you can expect stock market volatility to continue, which means it’s important to prepare now to ride out the ups and downs.
“When things get shaky like this — and stay that way for a while — I don’t try to outguess every move,” said Edward Corona, a Florida-based trader and publisher of The Options Oracle Newsletter. “I just focus on positioning myself smartly so I’m not forced into any bad decisions.”
Here are four other ways you can prepare for an extended period of stock market volatility.
Adopt the Right Mindset
Anthony Grosso, a New York-based financial strategist and mortgage loan originator, expects “long periods” of stock market volatility. His advice? Adopt a positive mindset rather than “working from a position of fear” over what you’ve lost.
“When something is crashing out, something new is just beginning,” Grosso said. “Don’t go back to the same horse that’s showing weakness — look elsewhere, even if it’s just a small percentage, because every cycle turns.”
He offered the example of companies selling masks or hand sanitizer during the COVID-19 pandemic: “The opportunity was there while everything else shut down. That’s how the market always goes.”
Focus on Quality and Fundamentals
Corona’s advice in a volatile market is to “ditch the junk” and stick with stocks that have a proven track record of financial success.
“Volatility has a funny way of shining a light on what doesn’t belong in a portfolio,” he said. “So I usually use this time to clean house — cut the weaker names, and rotate into companies with strong fundamentals. If a stock can’t hold up during volatility, it probably won’t hold up in a recession, either.”
Don’t Try To Time the Market
It’s tempting to dump stocks during a downturn — or gobble them up during an upturn. But it’s not always easy timing things right to maximize your return.
“If you sell and are still on the sidelines during a recovery, it can be difficult to catch up,” according to Fidelity. “Missing even a few of the best days in the market can significantly undermine your performance.”
Keep Cash and Other Assets on Hand
Corona likes to “keep some cash on the sidelines” during periods of volatility.
“It gives me flexibility and keeps me from chasing bad setups,” he said. “If something drops hard on an overreaction, I want to be in a position to act — not stuck watching from the sidelines because I’m fully committed.”
Another thing to keep an eye on is how volatility and tariffs impact consumer prices. As a hedge against inflation, Grosso recommends putting part of your money into assets that “move with the market,” such as real estate, art, jewelry, watches, gold and silver.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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