Episode 207: Trump's Tariffs and Stock Market Woes: What You Need to Know

So it still blows my mind that We've completed over 200 episodes of the Weekly Wealth Podcast.

But welcome to episode number 207.

And today we're talking about some of the stock market volatility.

If you've been watching the news, which maybe you should turn off the news and that would lessen your stress level.

But if you've been watching the news, you've been seeing some stock market declines recently and some stock market volatility.

So I'm going to give you some pointers on some actions that you can take that might reduce your stress and can help you to improve your financial position.

Welcome to the Weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

So if you turn on the news, if you look at social media or if you look at any of the news websites, you'll see all of the headlines.

You'll see the possibility of major tariffs and then maybe the tariffs are going to be lessened, that there possibly is an escalation in the Ukraine war and then maybe there are some de escalations, there are some issues with Canada, there are the immigration issue.

There are so many things happening in our world right now and a lot of the experts are saying that this is a headline driven market.

The stock markets are looking at the things that are going on that have some economic impact and there are some potentially amplified results.

So today I want to talk about some of the things that you can do when markets are in a period of volatility.

But before we do that, let's do all the things.

Please tell your friends, your family, your colleagues and your co workers about the show.

Like I always say, how we handle our money should have a positive impact on our lives and the lives of those around us.

And I really hope that this podcast can be a small piece of that puzzle in your life.

Also, make sure to like and subscribe to the podcast on whatever platform where you listen to and join our Facebook group.

Go to Facebook and just type in Weekly Wealth Podcast and you can also find us on Instagram.

All right, so now that we have all of the social media out of the way, let's talk about some things that you can be doing in your personal financial situation in this headline driven market.

So let's talk numbers.

First of all, let's Talk about the S&P 500 index.

And let's talk about the closing price.

On January 2nd of 2025, the index closed at 58.68.55.

Then in on January 23rd, it closed at 61.18.

So we have a nice big gain there.

And it hovered above 6,000 for a while and it got all the way up to 6,144 on February 19th.

And then as of this right this second on March 5th, we are down to in the 57, 5,800 range.

The market has not necessarily decreased that much.

It's only down a little bit.

But we have absolutely gone way up and then we've gone back down.

Let's look at the Dow Jones now.

On January 2nd, the close was at 42,392.

A couple days later, we made it down a little bit below 42,000.

But then we started a climb.

We were up to 44,882 on January 30th.

We hovered around that range.

We closed at 44,627 on February 19th.

Then we started dropping to 43428 on February 21st.

And as of March 5th, we're at 42,723.

So still barely up for the year, but we are down from the highs of the year.

So, yeah, I mean, it has been a roller coaster of a ride starting in January until now when we are in March of 2025.

So the first thing that I would love for you to do is let's if you're stressed out, if you're worried, let's stop, let's take a breath and let's acknowledge that it is normal and totally okay and acceptable to have some financial stress.

You're not a bad person.

You're not overly anxious.

You're just a human who might be watching your portfolio balances go up and go down and that can cause some stress in your life.

So it's totally normal.

I empathize with you.

I have my own portfolios and some of them are up, some of them are down.

But they do have those fluctuations.

So that's the first thing.

Let's get that out of the way and let's say it is okay.

Don't worry.

If you are worried, nobody should be judging you.

It is in addition to that, we might want to stop looking at the balances of our accounts, especially for our accounts that are geared towards retirement or geared towards events that might be decades and decades away.

So right now, let's say hypothetically you have a million dollar account and you're 40 years old and this is your IRA that you really can't even touch until you're 60 or you're not planning on touching until you're 60 or 65.

And let's say your million dollar account goes down to $850,000.

And that really does stink.

That's no fun.

That can be stressful.

But this hypothetical example, this is money that you're not planning to touch, you're not going to touch for 20, 25, 30 years.

So why are we worrying about what probably is a little bit of a blip on the radar for these kind of accounts?

The down market might even be a buying opportunity because if prices are artificially low, maybe due to, and maybe as you're contributing to your 401k or your IRA, maybe you might buy some shares of stocks or bonds or mutual funds or EFTs at a discount.

So the down parts of the market might even be a blessing in disguise for you.

But it really is important to make sure that you have separate buckets of money and each of these buckets are allocated for different purposes and have different time horizons.

So let's give an example.

Let's say you're saving to buy a new house and you're going to need a down payment somewhere between two and five years from now.

Well, those monies really should not be invested in a place that might have significant market volatility.

So those money should be invested much more conservatively.

Maybe a money market, something like that, that can have a little bit of growth.

But it would really hurt you if right before you're ready to put your down payment down on your new house, we had a correction year and your down payment went down by 40%.

So that would be a bad thing because that is an investment with a short investment horizon.

Now, as we spoke, your retirement account that you may not be looking at touching for 10 or 20 or 30 years, you can probably afford some fluctuations there.

Now, when we move into the distribution phase of our lives, when we are taking money out of our retirement accounts because we're no longer working, then we have to have those accounts allocated adequately as well.

So there may be times as you are getting older, older, and you no longer have a salary or paycheck that, yeah, you want less stock market exposure.

So having an investment philosophy is important for our clients.

We have what's called an ips, an Investment Policy statement, and that helps us to kind of guide our decisions on where we are going to invest our clients money based on all of those factors.

And even more so, if this is something that interests you, or if you're just thinking, I don't know, like, am I taking too much risk?

Am I not taking enough risk?

Shoot me an email.

Davidarallelfinancial.com we can talk about some of your specifics.

Okay, so now that we've talked a little bit about just making sure that you have the right amount of risk for the right buckets of money, I wanted to talk about two different types of financial instruments that might.

And remember, we're not giving specific financial advice, we're just giving information.

And you should consult your own financial advisor.

But two instruments that might make sense for you to protect you from large downturns in your portfolio.

So the first one is an indexed annuity.

Now, very generally speaking, what indexed annuities do is they will typically have a floor of zero, and your account would be tied or indexed to a specific stock market index.

So it might be the S&P 500, it might be the NASDAQ, or it might be a bond index, and you would typically have a floor of zero, and you would have a ceiling of, let's say, 7, 8, 9, or 10%.

And very simplistically explained, if the index gets less than zero, then your account will stay at zero.

So that means you start off with $100,000 and your annuity is indexed to the S&P 500.

And that year the S&P 500 gets negative 10%.

Well, because your account is indexed to the S and P and it has a floor of zero, instead of going backwards, your account just stayed at zero, which is a heck of a lot better than going backwards by 10%.

Now, on the other side, an indexed annuity will typically have a ceiling, and the ceiling will be something like 6, 7, 8, 9, 10%, whatever it is.

And they vary.

And we're going to use 7 as an example.

But remember, your specific annuity will have a specific ceiling.

But if your annuity has a ceiling of 7, and if it's indexed to the S&P 500, and if the S&P 500 gets 15% that year, you are only going to get 7% return.

So basically what you're doing is you are trading the potential to lose money with the potential to have an unlimited return.

So in the years where the market does much better than the ceiling than the company, your annuity issuing company, which has to be be a life insurance company, they, they keep that money.

And that's how they stay in business.

And then on the years where your index performs worse than your than your floor, then you stay at zero.

So it's a pretty cool way to make sure that you don't have that catastrophic market loss that a lot of people are afraid of.

So that is an indexed annuity explained, maybe in an overly simplistic manner.

But if you have any questions or if you want to know how it might work for you specifically, make sure to email me davidarallelfinancial.com and we can talk about it.

Now, another type of a financial instrument is a buffered etf.

A buffered ETF is a type of investment that helps protect against some losses while still allowing for some gains.

It's really like a safety net for your money.

If the stock market drops, a buffered ETF will absorb a certain percentage of the losses and there is some limited upside.

So in exchange for that protection, there's now a cap on how much you can gain.

If the market goes up a lot, you'll only get part of the growth.

But if the market goes down a lot, you will tend to not lose anything or only lose part of it.

So a buffered ETF might be another type of investment, or we can call it a financial instrument that can help you to sleep at night.

Many of my clients who are getting close to retirement, they are more afraid of a catastrophic portfolio loss than they are excited about earning a few extra points on the top end.

So they would be hurt more by a large portfolio loss than they would be helped by earning another couple percentage points.

These types of investments or instruments are very, very appealing.

So buffered ETFs might be something for you to consider, as might an indexed annuity.

So if a buffered ETF sounds like something that you think might fit into your personal financial situation, make sure to email me davidarallelfinancial.com we can talk about it, we can see if it fits into your ideal scenarios.

And before we move on to some other common sense strategies that you might think about implementing during times of market volatility, let's talk about cash.

And when I'm talking about cash, what I'm really talking about are cash and like equivalents.

So these can be money markets, these can be savings accounts, these can be checking accounts, things like that.

Now, especially if you are close to retirement or you're in retirement or the distribution phase of your life, it might be a good idea to hold six months to a year or even more of bare minimum living expenses in cash.

So why do I say that?

Well, let's go back to a catastrophic portfolio loss.

Let's say you've done really, really well and you have built up a three, four or five million dollars portfolio and you're in your mid-60s and you're at a period where taking distributions from that portfolio.

And let's say we do have that down market year of 40%.

So your $3 million portfolio has gone down by $120,000.

So that's kind of a rough way to go and that might be a little bit painful.

Now, if you had a relatively significant amount of cash, you might decide to pay for all of your living expenses out of cash that year and give your portfol to recover.

Having cash will allow you to probably sleep at night so you can weather the storm of having a potential portfolio decrease and will also allow you to give your decreased portfolio if it does happen.

Time to recover.

Think about how much it would cost you to live maybe if you tightened your belt a little bit in some hard times.

And think about if you should hold six months or a year or 18 months worth of cash in a money market or in some short term CDs or things like that.

So that's one way that some of my clients are able to sleep at night because they know that they have enough cash to weather the storm.

What do you think?

How much cash should you have?

How much cash do you have?

And would a little bit more cash help you to sleep at night?

Okay, so we've talked generically about making sure that we have different buckets of money that are invested differently with different amounts of risk for different time horizons.

And then we also talked about out some different financial instruments which would be buffered ETFs and indexed annuities.

And both of those in similar ways, they give you downside protection.

So you can either not lose a lot of money or you cannot lose any money.

And then you also have some upside, but you have limited upside.

So those are some ways that my clients manage their risks with some of their money.

Now, I want to talk about some other concrete actions that you can consider taking when the markets are doing some crazy things like they've been doing for the last few weeks.

But really these are things that we should always be doing.

So the first thing is let's look at our budget, let's look at our spending plan.

Are you spending an amount of money each month on needs and on wants that is appropriate for your financial reality?

So you'll notice you very rarely will ever hear me Say the word afford.

I can't afford.

Or you shouldn't afford.

That, that.

Because I think that's a word that's just a little bit restrictive.

But what I do tell myself and my clients that we need to spend the amount of money that is appropriate for our financial reality.

So while the markets are going through a period of volatility which may last a week, it may last years.

Who knows how long it's going to last?

Let's make sure that we are not overextending.

Let's make sure that we're keeping financial margin.

Let's make sure that we are spending less money than what is coming in every month.

Okay, so that's number one, let's just control what we can control, right?

And we can generally control our spending.

Look at needs, look at wants.

And that works for everybody.

It works for low income, and it works for most of the listeners of the weekly wealth podcast who are mass, affluent or high net worth.

Now, something else for us to look at and we have a lot of control over it is our insurance and our risk management.

At its core, insurance simply protects your money.

Nothing more, nothing less.

If you cause me to have a loss, either you're going to pay for my loss or your insurance is going to pay for my loss.

And you'd probably much rather have your insurance pay for my loss.

But let's throw in a double whammy.

Let's say that you run a stop sign and you cause my whole family, through your negligence, to have a large, large loss and we have high medical bills.

Let's also say that at the same time, your portfolios are down 30% because we are in a period, hypothetically where portfolios are down, the markets are having some of those bad years, and now you have to liquidate part of your portfolio in order to pay for my damages.

Well, that's a double whammy because number one, you're having to pay me a lot of money, and number two, you're having to liquidate stocks that are down in value in order to be able to pay me, and that is locking in a loss.

So have a good local insurance agent and periodically ask him or her to review where your major risk exposures are and ask how those risks can be transferred to an insurance company.

Sometimes they can, sometimes they can't.

But you want to be making your insurance decisions on an informed basis, not simply by default.

And finally, if you are a business owner, and you know, I love the business owners because I am a business owner myself, take this time where there is market volatility and let's make sure that we're doubling down on our business.

Let's do all the things that we need to do to make our business more profitable.

Let's be efficient.

Let's make sure we are bringing value to our clients and to our customers and we are leading our teams properly.

And sometimes, again, this is a way for us to feel like we have control and we're able to take action and it can take away some of the stress that we have from market volatility.

And don't forget, if you're a business owner, your business should be looked at as an asset and it's typically your biggest asset.

And unlike the stock markets, you have direct control over your biggest asset, which is your business.

So do the things that you have to do to make your business profitable and to make it more sellable.

Now, if you have any questions on how to make your business more sellable, you can certainly go to my Exit Planning website and I have some really good information in there on how to make your business more sellable and also a link to the Value Builder Score that can tell you how sellable your business is and also tell you some of the areas where you might improve your business so that you can sell it for a higher multiple when you're ready or simply have an easier and more profitable life today.

So that brings us to the end of the episode.

How are you handling the volatility?

Are you stressing out?

Are you watching cnbc?

Are you watching the news channels?

Are you getting really into politics?

Are you logging into your investment apps and stressing out and getting worried?

Or are you ignoring it?

Are you managing your own investments or do you feel like having a professional help you to come up with an investment philosophy and investment management strategies is a good idea for you.

Go to our Facebook page.

Just go to Facebook and type in weekly wealth podcast in the search bar and let us know.

To me, it's fascinating the psychology of money and how different people handle different financial situations.

So I enjoyed chatting with you and until next episode, I wish everybody a blessed week.

Thanks everybody.

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However, Parallel Financial does not warrant its accuracy or completedness.

The materials are provided for informational purposes only.

It should not be used or construed as an offer to sell or a solicitation of an offer to buy any security.

Past performance is not indicative of future results.