Financial markets have seen unprecedented turbulence in recent days, primarily driven by ongoing uncertainties stemming from President Donald Trump’s trade confrontations with China and other nations. Financial analysts advise investors to remain committed to their long-term strategies and avoid making impulsive decisions.
The Dow Jones Industrial Average recorded remarkable fluctuations, with back-to-back sessions experiencing swings of over 2,000 points on both Monday and Tuesday. Notably, Monday’s trading marked the highest intraday point shift on record.
As investors closely monitor their 401(k) and IRA accounts amid this volatility, experts stress the importance of staying calm and not hastily selling off stocks or diverging from a well-conceived long-term investment strategy. If these plans are diversified appropriately, the short-term volatility could ultimately prove advantageous.
“If investors have a solid plan, they should adhere to it,” said David Bahnsen, founder and managing partner of the Bahnsen Group, in an interview with Finance Newso Business. “For instance, if they have a portion allocated to the stock market within their 401(k) or retirement accounts, that allocation is designed to account for the fact that markets experience significant downturns at times.”
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Bahnsen noted that while market fluctuations might not occur with such intensity frequently, they are a natural part of investing. Historical events, including the aftermath of COVID-19, the 2008 financial crisis, and the response to the 9/11 attacks, demonstrate that these cycles are recurring every five to seven years. Although challenging, they play a crucial role in achieving better returns over time through stock market participation.
Bahnsen also cautioned against the dangers of making hasty decisions in response to market chaos, explaining that such reactions can undermine long-term profitability. “What investors do to harm their own returns is panic selling during these periods. It’s critical to remember that we cannot predict whether the trade conflict will resolve in a few hours, weeks, or months. What is certain is that it will eventually end,” he stated. “This market turbulence may be nearing its conclusion, but more upheaval could also lie ahead.”
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He further elaborated that consistently contributing to 401(k) plans or reinvesting dividends during market downturns can enhance a portfolio by acquiring stocks at lower prices.
“This is a significant reason why I have built a $7.5 billion business as a dividend growth investor. Reinvesting dividends during market lows significantly benefits a portfolio—you end up purchasing more shares at discounted prices,” he explained. “So, if investors are adding to their 401(k) bi-weekly and reinvesting dividends, they are effectively enhancing their portfolios even during market declines, which is grounded in tangible financial principles.”
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Christopher McMahon, president and CEO of Aquinas Wealth Advisors, emphasized the importance of routinely reviewing investment portfolios in alignment with one’s risk tolerance, age, and retirement objectives. He recommended making rebalancing adjustments as part of a methodical process rather than reacting hastily during periods of market unrest.
“Establish a comprehensive asset allocation strategy, adhere to it, and then reassess your risk profile every 18 months. If you are approaching retirement, especially in your late 50s or 60s, consider evaluating your strategy every 12 months,” he advised.
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McMahon pointed out that historically, the market has shown a relatively quick recovery from substantial downturns, reinforcing the need for investors to maintain a long-term perspective knowing that rebounds do occur.
“The average recovery period following a 10% decline has typically been around three months, while a 20% correction usually sees recovery in about eight months. While this timeline may vary this time around, recovery will likely happen,” he affirmed.
