By Andrew Welsch
The gyrating stock market has financial advisors working overtime to reassure worried clients and to emphasize the importance of diversification and long-term planning. One thing they aren't doing is making wholesale changes to portfolios.
"One of the challenges is the snapback," says Sean Hanlon, co-founder and chief investment officer of VestGen Investment Management in Chicago. "This market could pivot 5% to 10% to the upside based on one sound bite from the White House. That makes it difficult to think through all the potential outcomes and arrive at anything more than minor asset allocation moves."
Although advisors may not be making dramatic moves, the market has. The S&P 500 has fallen 10.7% since last Wednesday, when President Donald Trump unveiled tariffs that exceeded Wall Street's expectations. The selling has vaporized trillions of dollars in market value as investors have weighed how global trade could be remade if the tariffs become permanent.
Advisors say clients are experiencing a range of emotions in response to the selloff, from anxiety to fury. "One thing I am struck by is some of the anger," says Anne Marie Stonich, chief wealth strategist and wealth manager at Seattle-based Coldstream Wealth Management. "I've heard from clients saying 'This is so self-inflicted, why are we doing this?' That is very different from what we heard during Covid."
While some clients need help understanding what is transpiring in markets, others want to know what actions they should be taking. Although advisors say sometimes the best response to market events is no response, it's hard to deliver that message to a jittery client. "You need to start those conversations with a degree of empathy, because it can be unnerving," says Evelyn Zohlen, regional director and senior financial planner at Apella Wealth in Huntington Beach, Calif. "You can't just jump in with charts and tell them they're wrong, because in a sense they aren't wrong."
UBS advisor Charles Day says his team has been proactively emailing and calling clients, sharing his company's research reports and reminding clients of defensive moves they have already made. For instance, in October and January, he sold stocks that had substantial gains on behalf of clients. "The benefit of outgoing calls is we don't get incoming calls; they know we are taking care of them," says Day, who is based in New York.
Day suggests clients cut back on their news consumption, which he says isn't "good for your psyche." He is also reminding them that it is important not to overreact and make abrupt portfolio changes that they may regret later. "The time to put your seat belt on is before a car accident," he says.
Uncertainty. The stock market's roller-coaster ride Monday underscores the danger of overreacting to short-term news. The S&P 500 fell more than 4% Monday morning before soaring on a report that Trump was considering a 90-day tariff pause. When that report turned out to be false, stocks turned lower but ended down only 0.2%.
There's a sense among some advisors that the Trump administration will eventually have to walk back some, if not all, of the tariffs given the damage being dealt to markets as well as consumer and business confidence.
"I was speaking to an investment banker about how deals for companies are being put on hold because valuations are nearly impossible to determine right now," Stonich says. "That is part of that long-term impact that we can't digest yet because in the short term we don't have a sense of where the goal posts are. Where will tariffs land? That is the uncertainty."
Economists fear that tariffs could slow economic growth and even push the U.S. economy into a recession. On Sunday, Goldman Sachs economists led by Jan Hatzius lowered their forecast for economic growth and raised their 12-month recession probability to 45% from 35%, citing tighter financial conditions and policy uncertainty that is likely to depress capital spending. "This baseline forecast still rests on our standing assumption that the effective U.S. tariff rate will rise by 15 [percentage points] in total, which would now require a large reduction in the tariffs scheduled to take effect on April 9," they wrote.
Advisors typically encourage clients to set aside money they need in the near future in high-yield savings accounts, money-market funds, certificates of deposit, short-term bonds, and other safe investment products. Having several years' worth of spending needs set aside can enable an investor to ride out a bear market.
Some advisors are using the market downturn as an opportunity to discuss financial planning moves clients can make. Jeremy Sharp, partner and financial planner at Redeem Wealth Management in Gilbert, Ariz., says his firm is talking with clients about Roth conversions and tax-loss harvesting. With clients who have accumulated dry powder, "we are telling them to stick to their process, keep dollar-cost averaging, and keep doing what you are doing," he says.
For investors with a long time horizon, the market's selloff can be a good buying opportunity. It is also a good reminder as to the importance of diversification. Charles Day, the UBS advisor, observes that although U.S. stocks outperformed international stocks for years, the reverse is happening this year. "When things are good, diversification annoys people, but when things are bad, people are grateful for diversification, " he says.
VestGen's Hanlon says he's also drawing on history to both reassure and remind clients that periodic drawdowns in markets are to be expected. Some clients are asking him how long this may last. The answer, he says, is no one really knows.
"Every time we are in one of these, we think it's the end....This one feels like it's a little more manageable than having trillions of dollars of bad mortgages invested in bad portfolios throughout the entire globe." he says, referring to the 2008-09 financial crisis. "That you don't fix quickly. This one they could fix quickly tonight if they wanted to."
Write to Andrew Welsch at andrew.welsch@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 07, 2025 18:08 ET (22:08 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
