Women's Money Wisdom

Episode 266: Tariffs, Crashes, and Bear Markets

• Melissa Joy, CFP® • Season 4 • Episode 266

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Market volatility can be unsettling—but long-term financial success is rarely built on short-term reactions.

In this episode of the Women’s Money Wisdom podcast, Melissa Joy, CFP® addresses the emotional and financial challenges that often arise during market downturns. As markets enter bear territory, many investors may feel inclined to make significant changes to their portfolios. Melissa encourages listeners to take a step back and revisit their overall strategy, focusing on long-term planning rather than short-term uncertainty.

She discusses general principles and planning considerations that can help investors stay grounded, including the potential benefits of maintaining diversified contributions, reviewing withdrawal strategies, and exploring financial planning opportunities that may arise in volatile environments.

This conversation is not a recommendation or a forecast, but a reminder that financial decisions are best made from a place of clarity, not fear.

Don't forget to check out the most recent Pearl Planning blog with more on tariffs and current market conditions. View here.


Topics Covered:

📉 Why emotional responses to market movements can lead to unintended consequences
 📊 How continued contributions during down markets may support long-term goals
 📋 Considerations for tax-loss harvesting, Roth conversions, and estate planning in down markets
 🧠 Understanding the emotional side of investing and building financial resilience
 ⚖️ The value of small, intentional adjustments over reactive decision-making

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show. Just a quick note before we dive in. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. So be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are my own and those of my guests, and they don't necessarily represent those of any organizations that I'm affiliated with. For more important disclosures, please go to our webpage at pearlplancom. Now let's get started.

Speaker 1:

Welcome back to the Women's Money Wisdom Podcast. Today's episode is late-breaking. We usually don't try to tell you exactly what's going on in the news. Right now we're more of an overtime kind of podcast, but we are entering bear market territory in terms of stock markets. I'm recording this episode on Monday April 7th to be released on Tuesday April 8th, and we just got a lot going on and I thought it would be great to talk to you in real time about how a financial planner looks at changing and difficult stock markets and investing markets. So to give you a lay of the land, on Wednesday previously expected tariffs were announced by President Trump and those tariffs had been kind of touted as coming with what's called reciprocity, that you would look at what tariffs were happening from foreign governments and make similar tariffs. And yet when the tariffs were actually announced, for much of the market and that's not really the point of this podcast is to get into exactly what's happened but the taxes for imports from foreign government were much more broad and amplified just big multipliers, three to four times higher than anticipated, and amplified just big multipliers three to four times higher than anticipated. And as a result of that, that is, markets don't like change, they don't like uncertainty and there have been big moves in the stock market. I'm recording this before the market opens.

Speaker 1:

On Monday morning and on Thursday and Friday markets were down big, entering correction territory and people. It's difficult to define a market crash, but for certain segments of investing, including the NASDAQ, including small company stocks in the US, then we have been entering, or have entered, bear market territory, as measured by a 20% pullback territory. As measured by a 20% pullback, and other investments, including international investments, as well as the S&P 500, large companies here in the US are also experiencing nearly bear market territory, with futures today opening lower. Now, who knows, by the time you listen to this episode, where markets will be, and we're not talking about the exact moment or what to do on any given hour or in any given day, but what I wanted to do today was talk to you about how you need to set your mindset and frame your financial decisions during times of volatility, uncertainty and downward returns, and I wanted to give you some actionable items to take with you and also some don'ts. So this is a do's and don'ts for bear market investing, and so, just to get started, I want to talk about investments themselves and one of the things that you should know for people who are invested with risk in mind, and asset allocation and long-term investing plans, like the way that Pearl Planning does investments. You should know and it's difficult to remember this as you see negative returns on your statements or when you log into your accounts, that many investment strategies were built to include very difficult markets. So you can ask your financial advisor or ask yourself if you're self-managing. Did you choose these investments to own for a long period of time through a variety of circumstances, keeping in mind that bear markets aren't, you know, kind of unicorn events they happen frequently.

Speaker 1:

This event is a little different because it seemed its source, for many of us believe, is coming directly from US government policy and typically we are listening for the US government officials, whether it's the Federal Reserve or the executive branch or members of Congress. We're looking for them to alleviate stress in the markets. But communication and language from Washington DC, from President Trump, has said you know, you just need to get used to this. This is the new normal, and so we haven't seen that kind of alleviating risk kind of messaging coming from the Capitol. Events like you can use the housing market crisis of the great financial crisis and say you know that came from lending policy, not directly necessarily from the US government. It could have been deregulation years prior, but not actions that week. That this time is a little bit different.

Speaker 1:

But, that said, investing markets like this are not necessarily different, and so the first thing that you want to think about is is my strategy built long-term, and many strategies are, and what that would communicate to you is to not deviate from your strategy. I cannot tell you how much higher the probability is when you kind of bail on your strategy. You go to cash and then you're scarred from the losses that you had because you locked them in. How much harder that is to recover from than investment strategy that remains fluid, remains in touch with your original intentions, how that makes it so much easier to invest through and beyond. And that can really be difficult in the moment, because our natural instinct is to say we're in trouble, hunker down. And that comes from our ancestors who, frankly, were trying to protect themselves from, you know, things lurking in the night when it comes to our very ancient ancestors, and our brains have been wired to want to do something when it comes to market changes.

Speaker 1:

So from here I'm going to talk about actionable things that you can be doing when an investor like me says focus on what you can control. And that is our mantra in a day like this. One, focus on what you can control, another famous, you know kind of piece of wisdom that I always use in moments like this is statistically speaking, the world doesn't end that often you just you initially have a likelihood of catastrophizing, saying what is the worst case scenario. I think that's appropriate reaction, but do not act to protect yourself from with this catastrophizing emotion kind of hat on and instead try to be really constructive about what you're going to choose to do from here on out. So, talking about investing first, there's two instincts. One is to just hunker down, go all the cash. The second might be to put as much money as you have into the market. We really are fans, in a moment like this, of incrementalism. Incrementalism being like picking moments where you want to go into markets but not putting every dollar that you have at risk assets. And also, if you feel like I just can't take the risk my portfolio has, if you're considering making a change, make that change one notch less risky and more. Plan to keep that change intact in your portfolio. Don't go all to cash and wait for the perfect moment to go back in.

Speaker 1:

When you are an investor also, you may be reconsidering the type of investments that you own. So, instead of selling all of your stocks or all of your bonds. You may want to change the type of bonds that you own or change your mix of stocks. To change the type of bonds that you own or change your mix of stocks, that would be more appropriate and perhaps more forward thinking than just going into cash, but again, that would also often mean that you need to be a little more sophisticated as you're considering your options. If you are a recent investor in taxable accounts, you may have what's called a tax loss an unrealized loss in your portfolio that can be used, if sold right now and becoming a realized loss, to offset gains that you take in the future or you've already had this year in terms of your investments. And if you don't use them all up in a calendar year, you can often carry those gains forward, and so one thing to consider would be tax moves that can help you reduce your future tax liability or your current tax liability, and that is a very appropriate thing to do.

Speaker 1:

There's a couple things to keep in mind if you're doing this tax loss selling First, we don't recommend that you sell to cash, like we just discussed. Instead, if you sell something that is perhaps a US large company stock and then you buy something similar but not the same. So let's say you sold the S&P 500 index or ETF and you buy the Russell 1000, both of those have a weighting to the largest US companies then those would be two different investments. You would pick up the loss in the S&P 500. And, notably, you can't go back into that S&P 500 investment for a period of 31 days in order to get what's called the tax loss. Otherwise it's what's called a wash sale. So tax loss selling or tax management of your strategy is certainly appropriate and something you can control at this time.

Speaker 1:

Another thing that I think is really important and you can still contribute maintain the investment strategy that you're doing, continue to contribute and if you have room to give more and you wouldn't be hurt by that, then consider boosting the amount you give. Then you can tell yourself you're doing something because you are, and it is a wonderful strategy, as things are turbulent and going down to add a little bit more in Now. On the flip side, if you're a retiree and you're taking money from your portfolio, I would strongly encourage you to review what is coming, see what has changed and evaluate your budget, evaluate your spending, and you may choose to delay sending money or just augment your budget. You don't need to completely overhaul it, but a year when markets are down are not the best year to spend the most. So and then third, on the investing side, is if you've just kind of shut your portfolio and not looked at it for a long time, and perhaps it's an investment in a way where stocks crept up and bonds were a lower percentage over time because of their past returns which would still probably be evident in portfolios given even with the market pullbacks because the way that investments have behaved over the last five and 10 years then rebalancing not going to cash, but making sure that you adjust your portfolio to the way that it should be today would be appropriate. Okay, so I also think that there are some important considerations beyond just your investments. One of the things that's happening right now is there's a recalculation and a reassessment of the probability of a recession.

Speaker 1:

We had a strong US economy that had been resilient in the face of inflation and growth, while the government sector is anticipated to be shrinking. The US corporate environment was perceived to be strong and able to offset intended cuts on the government side, or at least considered to have a fighting chance. But when you look at the cost of tariffs and the implication in terms of uncertainty, decision making and the ability to forecast for US companies, that is much more murky today. Let me give you one example. The intention of the tariffs is to re-home factories back to the US and increase manufacturing in the US. But in order to buy, to build and construct manufacturing facilities even if you have the existing space built out then you would likely have to retrofit for a newer, more modern kind of manufacturing base, and that requires materials and parts, and those materials and parts are often being created overseas. So you would need to order things that would need to be imported that would have a higher cost because of tariffs. So you would need to order things that would need to be imported that would have a higher cost because of tariffs. So there's kind of a catch-22. How do you build the manufacturing base at the higher price when you're already pressured in terms of margins and components?

Speaker 1:

And so there's so many different complex factors going in, including your decisions on how to spend money as the US consumer, who is the broadest kind of supporter of the US economy, that say that we may be sitting in a different economic environment. And so when you think about that making sure that your emergency reserves are well intact and thinking through if you had a change in circumstances as an entrepreneur, if you're in your own business or a change in kind of the job situation all of these are important. Cash can be so valuable. That's what helps investors, like I described in our first section, really invest with. Confidence is having enough cash for your shorter term needs, and if you need to reassess your emergency reserves, you can make decisions by either holding on to things within your portfolio as emergency reserves perhaps pulling away a little bit of your bond portion to be cash, or reserves that you would utilize if you needed to. But also you may want to reassess and review your financial goals to make adjustments on what you would spend and your budget. To make adjustments on what you would spend and your budget, using apps like our clients use Monarch Money or YNAB is another great app to focus on your budget and cash flow can be really critical. But also, keep in mind these are the decisions that millions of Americans are making right now is how certain can I be that I can spend the amount that I'm spending today, and so that goes into the factoring of the probability of a US recession.

Speaker 1:

Your mindset is so important in down markets and I have a whole separate section right now where I want to talk about your psychology in terms of approaching markets. It's really important to acknowledge the pain and emotion that you feel when you see your statements and they're going down. Some people choose to not look at those statements for a while, and it depends on the person. I'm pro-looking, but more often than not, the preponderance of news is surprised on the upside, and good things happen over time. Keeping in mind that this is a moment in time, not a permanent situation, and knowing that you have an investing mindset that acknowledge that we have good days and bad days, as we always set up our clients to know and understand, can be really critical as you navigate through your other decisions, because it's easy to feel impulsive and make short-term decisions that will have long-term implications that are quite difficult, and so I just want you to keep your mindset in mind. In order to support that mindset, I would encourage you to do the regular things that can build resilience in your mental well-being, whether it's taking a break from focusing on the markets. If you've got CNBC turned on all day, change the channel, get outside, take deep breaths, get exercise and also talk with financial professionals, or listen to pragmatic, rational financial professionals and not just alarmists. It's easy to get the headlines when you are chicken little and say that the sky is falling, but it's much more practical to assess things with a mindset that realizes that you're making decisions that can be important not just for today but well over time.

Speaker 1:

A few areas that I think it's important to think about as you're trying to say, hey, where can I go and what can I do. I already mentioned in retirement savings. If you're able to boost what you put in, that can be super valuable. When it comes to college savings, if you've got a kid that's approaching college and you had chosen an age-based plan, you're likely mostly in bonds, which has protected you from a lot of the impact on markets so far. But you can assess and look and if you just know you're going to have to write the tuition check in the fall, you may get even more conservative to a principal-protected portfolio. If you are saving for younger kids, then the same thing that I mentioned before of boosting your savings and not reducing it can be really valuable.

Speaker 1:

When it comes to insurance planning. I would encourage you to remember you're assessing risk today. That's why you're thinking should I do something different? And if you haven't addressed the risks that you have with underexposure or underprotection for disability insurance or you don't have you don't have life insurance and you should why not use this time to reduce the risk there? And you may also choose to do less elective procedures when it comes to health insurance. And if you're one of those people who has invested your health savings account and chosen not to use it, but money feels tighter right now and you don't have access in other places or you want to continue to boost your emergency reserve, then I would say that a health using your HSA in a time like this might be valuable For those of you.

Speaker 1:

When we think about taxes for those we've already mentioned tax loss selling I would also mention that if you are someone who does Roth conversions, this can be a terrific time to convert because the accounts are smaller, so you could move money into Roth with a bigger kind of percent of your overall assets if you were to move that money right now. And if you're doing charitable giving, giving out of a qualified charitable deduction or gifting appreciated stock could go a long way, especially if you're looking to make a difference in a time that has been difficult for many nonprofits and social services organizations. That can help you to feel good, feel like you're making a difference and also be tax wise when it comes to your portfolios. Same goes in terms of risk management. If you have delayed and put off your own estate planning, there is no time like the present to say, hey, I had a to-do list, I'm worried about the markets, but I also have some other things I can get done that won't impact my long-term investment results. Why don't I go ahead and get my will estate plan in order to manage things?

Speaker 1:

A little piece. A sliver, perhaps, of good news is potentially, we have the opportunity to have lower interest rates right now. Markets are predicting that rates will be lower over time, and that's why bonds have gone up and their yields have gone down, while stocks have been going down, and this may impact the ability to borrow. When it comes to car loans, you may be able to refinance debt at a lower rate, especially your mortgage debt, if you purchased a house in the last couple years, and so when you're thinking about different options, know that you need to keep kind of apprised of what's going on with interest rates and this may be a time to move money around so that you're paying less and you have more of that money going to principal. Now don't do this blindly. You need to talk to a trained professional and or really assess the overall picture Because if you, for example, had only 10 years left in a mortgage and you refi to a 30-year mortgage, you're changing the whole trajectory of what you're paying, of what you're paying, and that may be, you know, kind of overall more principle over time. So be eyes wide open and assess. It's not just a no-brainer and you do want the interest rates if you're refinancing to be lower.

Speaker 1:

If you're thinking about, you know, supply chain disruption and you have a big ticket item that you want to purchase. I've been talking to clients about purchasing vehicles, for example, in advance of tariffs kicking in, but I have to mention that that vehicle decision should be. It's a really big ticket item. As we all know, it's a bigger percent of our overall income nowadays and you need to make sure that it's the right time to do something. If you are doing something. The payments when it comes to auto loans, for example, are really high nowadays, so you really want to integrate that into your financial plan and not just consider it to be an incidental cost.

Speaker 1:

I also encourage people if you're somebody that kind of hoards frequent flyer miles, someone that puts aside all the points when it comes to, perhaps, a hotel credit card, this might be a great time where, instead of you paying for things with cash, you use some of the built-up funds that you have in points to reduce your overall spend, while you're able to do some of the things that you love. When it comes right down to it, there are so many different ways that you can adjust and modify your financial plan to fit today's environment and your needs without going to cash, and so I hope that you remember to be constructive, to see that what I see, which is I've lived through multiple bear markets, now with more than 25 years of investing experience, and when I look back on the past, the decisions that are made in moments like this can really set the table. They increase and boost your confidence. When you make the right decisions, when you don't capitulate and you don't for lack of a better word just freak out. It's very natural to be upset, angry, alarmed, nervous. It's very natural to be upset, angry, alarmed, nervous and uncertain. In a moment like this can look at your overall big picture, assess where you're doing a great job and also tell you where you have the opportunity to improve can be so critical and important.

Speaker 1:

My team at Pearl Planning is always available and you can feel free to go to our website at pearlplancom to learn more. I also just recently wrote a think piece last week, two days after the tariffs were announced that gave an overall assessment of what's going on and what's next. You can find that under pearlplancom blogs and you'll be able to see. We'll have a link in the show notes but you'll be able to see more of a market commentary of what's happening today. We'll be talking to you more about what's going on in markets, but also what you can do to have more money wisdom throughout your life in coming weeks, so stay tuned. Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way you can support the podcast is to forward an episode to a friend or leave a review. Go to pearlplancom and the podcast link to get all the resources and links mentioned.

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Melissa Joy, CFP

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