If you thought 2025 would prove a Valhalla for investors with a strong economy, low inflation, lower interests and a bull market for the ages, you may be waiting for a while.
Donald Trump wants to sweep a lot of stuff away and, he thinks, reorder the world. He announced Monday that 25% tariffs on imports from Canada and Mexico would begin just after midnight on Tuesday. He said he would double the tariff rate on Chinese imports from 10% to 20%.
💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰💵
Investors promptly told the president they were skeptical of the move. If you’re an investor, you may be wondering what to do next.
Related: Stock Market Today: Stocks tumble as Trump says tariffs will go forward
Here’s what happened after Trump’s announcement.
The Standard & Poor’s 500 Index dropped 1.8% to 5,849.72, its sixth loss in eight sessions. The index is down 5.2% since its 52-week high of 6,147.43, reached on Feb. 19. The Nasdaq Composite Index fell 2.6% to 18.350.19, also its sixth loss in eight days. It’s off 9.5% from its Dec. 16, 2024 all-time high. The Dow Jones Industrial Average fell 1.5% to 43,191.24. In its last eight sessions, the Dow has been relatively stable, falling just four days. But it’s off 4.6% from its 52-week high on Dec. 4.
Some individual stocks have been hit hard. Nvidia (NVDA) fell 8.7% to $114.06 on Monday alone. The shares are down 25% from their 52-week high of $153.13, reached on Jan. 7. Tesla (TSLA) was off a modest 2.8% to $284.65. But that’s down 41.7% from its 52-week peak price of $488.54 on Dec. 18.
So what to do next?
Here are some options.
You can do nothing
That seems like an irrational idea, but there’s an assumption behind the idea. Tariffs happen, and many are short.
So, markets adjust. And maybe you wait for a Republican-controlled House and Senate to work with the administration on tax cuts and new regulations that will free up markets, causing stocks to soar and interest rates to fall.
The question becomes, how long do you wait?
You can sell everything
This also looks irrational for two reasons.
If you dump your investments into a weak market, the one thing you won’t get is top dollar.Getting back into the market means you’ll pay more. You lose both ways.
Here is another factor to consider: why you’re in the market at all.
If you’ve been investing steadily for retirement, you need to consider how to protect your nest egg. That requires some planning and studying what markets are actually doing.
You can look at the slump as a lovely buying opportunity
Especially if you’re putting money on a pre-set plan such as a 401(k) plan or a similar vehicle. You’re dollar-cost-averaging into the market.
So, as you keep making your contributions into the slump, you’re getting more for your dollars. In the long run, assuming markets rebound, you’ll end up a winner.
You can sell the current weak links in your holdings or overbought holdings and buy them back later if you’re confident of a turnaround.
Traders work on the New York Stock Exchange on March 03.
Spencer Platt/Getty Images
Will markets find a bottom and turn higher?
Markets fall apart for many reasons.
The 2020 crash was a reaction to the eruption of the Covid-19 pandemic and a global shutdown until vaccines were available.
Or there is a serious economic crisis. The Great Recession of 2007-2009 was set off by a near-collapse of the global banking system.
The 2022-23 slump was a reaction to inflation and the Federal Reserve’s decision to raise interest rates and kill inflation.
A recovery, however, can take time.
In all cases, there will come a time when prices for stocks or bonds (or real estate, art, jewelry and collectibles for that matter) fall so far that the prices are screaming “buy me!”
The 2007-2009 crash took the S&P 500 Index from an October 2007 peak of 1,565 to a March 2009 low of 676. However, the index recovered all of its losses by the spring of 2013.
2025 stock market forecasts
Veteran trader who correctly picked Palantir as top stock in ‘24 reveals best stock for ‘255 quantum computing stocks investors are targeting in 2025Goldman Sachs picks top sectors to own in 2025Every major Wall Street analyst’s S&P 500 forecast for 2025
A tool to find a bottom
Here, it helps to have a plan or strategy that helps you recognize the turn is coming or is at hand.
The relative strength index is a useful tool. It measures how fast a stock is rising or falling compared a set number of days. A reading of 70 or higher signals the shares are overbought. Under 30 indicates they’re oversold.
The closer an RSI comes to 20, the more likely it is to be a buy signal, especially if it bounces off the low multiple times.
You can find RSI data on many charting tools online.
The Nasdaq Composite’s RSI was at about 32 on Monday.
Tesla’s RSI on Monday was 28.8. Oversold but maybe not ready to rebound.
Palantir Technology’s (PLTR) RSI was 39, despite its falling 33.5% from its 52-week high on Feb. 19.
Costco Wholesale (COST) , off just 0.2% at $1,046.85 on Monday, had an RSI of about 56. The shares were down but neither overbought nor oversold.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
