The trade war hits stock markets — how can you protect your finances?
The global trade war has hit the stock markets — this is how you can protect your finances.
Americans may have gotten pretty good at tuning out negative news and predictions, at least when it comes to investing, a Wealthfront survey suggests.
Individuals surveyed by investment platform Wealthfront continued investing through the April U.S. stock market volatility stemming from President Donald Trump’s tariff back-and-forth, and nearly 30% say they plan to invest more in U.S. stocks in the future.
That may seem counterintuitive considering the many dire forecasts for the economy and the stock market from tariff wars, but “it’s also possible that investors are getting better at handling the constant flow of headlines and uncertainties that have shaped the market lately,” said Alex Michalka, head of investment strategy at Wealthfront.
Optimism rises
In May, 55% of respondents said they were somewhat or very optimistic about the U.S. stock market over the next six months. That’s significantly higher than the 42% in April who felt upbeat.
The improved vibes are “likely fueled by the postponement of tariffs and the growing perception that future trade policies could be more moderate than initially anticipated,” Michalka said.
Since Trump first announced his aggressive tariff plan on April 2, some of the highest tariffs have been iced as the administration tries to strike trade deals. The latest, and arguably the most significant, talks are occurring this week in London with Chinese officials.
Is the worst over?
Market volatility isn’t necessarily over, and it can be uncomfortable for investors, but it’s a fact of life, Michalka said. Once people understand and accept that, it’s easier to stay the course and remain optimistic.
“During Covid, stocks went down really fast, but they also came back really fast,” said Nick Bour, founder and chief executive of Inspire Wealth in Brighton, Michigan. “If you get out, you could miss the big bounce back.”
Stocks ended May up 6% and are up again on the year.
Additionally, if you took advantage of tax-loss harvesting and dollar-cost averaging during the volatility earlier this year, you may have even done better.
Tax-loss harvesting means selling stocks that are losing money, recognizing the loss, and using it to offset capital gains, or profits made from other holdings, even if they are different types of investments or are being held in different accounts.
Dollar-cost averaging is buying stock at regular intervals, regardless of whether prices are falling or rising.
“Not only did you buy investments “at a discount,” you should have potentially valuable losses to use to lower your tax bill come tax time next year,” Michalka said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
