After the bursting of the internet bubble in the early 2000s, Lars Staack decided to play a role safely and invest his retirement savings in the S&P 500 index funds, which are diversified and at a lower risk than owning individual stocks.
The strategy has reassured him for twenty years – until President Trump was elected in November. Mr Stark, 62, retired two years ago, increasingly uneasy about the savings he plans to use in the rest of his retirement when he reviewed Mr Trump’s comments in favor of a large number of tariffs.
Those tensions about how Mr. Trump’s economic policies affected the stock market led him to start selling his index funds in January, transferring them to bonds and treasury funds, which were seen as a safe haven during periods of volatility. About one-third of his savings are still in stocks. He said the daily volatility over the past week included the worst day in the market in several months, which led him to consider transferring more assets to safer bonds.
“I’m working on trying to figure out what will be the best way to keep my savings in my retirement savings and the upcoming inflation,” Stark said.
Many financial advisors reiterate their usual advice during anxiety moments: Assuming your financial plan is diverse and aligned with your goals, do nothing and keep the course. But a turbulent round of trade shocked people like Mr. Stark, who had a direct demand for his own investment. His view is that stock market index funds are no longer safe for people approaching or retired – those who intend to use their assets in the near future and have no luxury time to wait for the market reversal process.
“What Trump and Musk do is unprecedented, so there seems to be nothing safe,” Stark said, who lives in California, California and has been a Republican voter outside of San Diego until he started voting for Democrats in 2016.
Wall Street has become increasingly pessimistic about Washington's whipping policy over the past few weeks. By Thursday, the S&P 500 fell 10.1% from its peak reached less than a month ago, amid concerns that the trade war and massive layoffs by federal employees could trigger a slowing sell-off. The S&P 500 correction highlighted how the two-year bull market ran out of steam in the early days of the Trump administration.
Financial advisers say policy and politics have been the main drivers of client concern. But not everyone is taking action. In fact, consultants at some of the largest wealth management companies say their clients stick with their existing financial plans for the most part.
James Martielli, Vanguard's head of investment and trade services, said that most of the approximately 7 million investors on the Vanguard Brokerage platform “maintain discipline”, consistent with their past actions during market downturns. Mr Martielli said on Monday, when Wall Street’s biggest drop in the year fell, only 2.5% of Vanguard’s clients traded, and most of those deals were buying stocks rather than selling them.
“Currently, most clients are a little drowsy now, but are still relatively comfortable,” said Mark Mirsberger, CEO of Dana Investment Advisors, who manages about $8.5 billion.
In conversations with clients, retirees are usually retirees, who focus on the stock market and express tension, said Rob Williams, managing director of financial planning and wealth management at Charles Schwab. The problem, he said, is their response.
Mr Williams said it might make sense for people closer to retirement to “risk the risk of getting rid of the table”, but that seems to be happening when politics becomes a factor in decision making, urging clients to stick to their plans and “react emotionally.”
Siegfried Lodwig has been more than a decade since his retirement, and the recent volatility has not changed his idea of saving about half of the stock market managed by a financial services company. He said he believed the market would rebound as usual.
Nevertheless, Mr Lodwig, 80, said he plans to leave his legacy to Amherst College, who received a scholarship a few years ago. He said he would have much left for the school if the market continues to decline in the short term.
Andy Smith, executive director of financial planning at Edelman Financial Engines, is warning his clients not to overreact to Wall Street’s troubles headlines. He said those with a diverse portfolio and enough cash to meet short-term needs can calm their nerves more easily.
“In times of fluctuations, everyone is upset,” said Heather Knight, national brokerage coach at Fidelity Investments. “Keep the course – this is the best way to spend some of these volatile times.”
But for some Americans, especially those who are expected to need to save in the near future, the current economic unrest is different from the market tendencies experienced in the past, prompting them to rethink investment.
Praisely McNamara, a single mother whose 16-year-old son is a high school junior, decided in February to withdraw half of her 401(k), the highest amount she could possibly have, although she had to pay thousands of dollars in tax penalty to do so. She works in healthcare sales and is still contributing to the Pioneer Index Fund. But with mortgages and college tuition payments, Mr. Trump’s policy stimulus economic instability is enough to make her feel she needs cash.
As a person without savings, Ms. McNamara of Newdington, Connecticut said uncertainty about the trade war and the prospect of the U.S. job market has fueled her decision.
Ms McNamara, 40, said: “This is definitely the first time I feel in any way that I’ve been told is the safest way to prepare for retirement.”
Even Americans don’t want Americans to use savings in the near future, and this fluctuation is also shocking.
Alison Greenlaw, 43, is still decades away from retirement. She and her husband bought a house in Bloomfield, Connecticut a few years ago. (Ms Greenlaw met Ms. McNamara through community organizations.) Until three weeks ago, her 401(k) was another pioneer target date retirement fund, a mixed blend of stocks and other stocks, based on the assumption that she will retire around 2045.
But as economic problems began to spread to the stock market in February, she decided to transfer all of her 401(k) savings to the Vanguard Money Market Fund, which has lower risk investments such as government-backed securities.
“I know I won't make money there, but I'm not frightened like every 401(k) every day,” Ms Greenlaw said. “I'm so glad I did my own job.”
Ms. Greenla tries to make informed decisions by talking to people who work in finance and the opinions she respects. Many of them advised her not to do anything. But she said she was reluctant to adopt the traditional waiting method. She said she felt the current level of uncertainty in the United States “existent”.
Stephen Dinan, 55, 55, transferred their 529 college savings accounts from U.S. stock and stock index funds to bond and international stock index funds on Tuesday. He also moved his 401(k) to his wife's bond.
Mr. Trump's unpredictable and aggressive attitude towards policies has made Mr. Dinnan worry about the instability of the stock market. He said he is a Democratic voter and he hopes to be able to restore his savings to stocks when the economic outlook clears or when the administration changes.
He said. “But they have no plans to remove the board game itself from below.”
