Local experts react to jumpy market 

The stock market made its steepest drop in five years after President Donald Trump announced tariffs on nearly all countries. Since then, stocks lost $6.6 trillion on April 3 and 4 alone.  

Perhaps that day should have been dubbed Try Not to Look at Your 401(k) Day. It’s a strategy advocated by Ron Penney, a private wealth adviser and certified financial planner with Penney, Murray & Associates. 

“The secret to less volatility in your account is to look less often,” Penney said. “It’s a very simple, proven technique, and I’ve told it to people so many times, it rolls right off the tongue.” 

Penney said the market is frequently unpredictable, and peace of mind can be hard to come by. But there’s risk in everything you do, he said, and that’s why taking things one day at a time and trying to make wise decisions is the practical move. 

“This is my 42nd year to do this, and I’ve seen quite a few things happen over the years,” said Penney. “I’ve been through this many times – the overreaction, fear and confusion.” 

Jeremy Loftin, chief operations officer at Legacy Bank & Trust Co., was a little less copacetic in his outlook. 

“The general theme right now is just a lot of uncertainty,” he said. 

Loftin noted when Trump was campaigning for office, he talked a lot about tariffs, so the move was not a total surprise. 

“I think what has really got a lot of people concerned or panicked, maybe, is just the breadth of this and all the countries targeted,” he said. “That was more than maybe what was expected.” 

Since “Liberation Day” on April 3, as Trump called it, his administration announced a 90-day pause on tariffs on April 9. The markets have bounced around since, and on April 16, Federal Reserve Chair Jerome Powell warned that fundamental policy changes were in play. 

“There isn’t a modern experience of how to think about this,” Powell was reported to have said in remarks to the Economic Club of Chicago. 

Stocks went into a pitched decline before Powell left the microphone, even as he noted the Fed would not be adjusting interest rates until data is clear on how the market is reacting to tariffs. 

Uncertainty  
Springfield Business Journal readers reacted to the market upheaval in a weekly online poll posted April 8. In it, readers were asked, “How soon do you expect investment portfolios to bounce back?”  

 For the collection period of April 8-16, more of the 483 respondents opted for “Within 5 years” (33%) than any other prediction. Another 29% picked “Within 6 months”; 26%, “Within 1 year”; 6%, “Never”; and 6%, “Within a Decade.”   

“I don’t know when we’re going to see the results of this,” Loftin said. “The longer it goes, potentially, the more harmful it can be to the overall economy.” 

Legacy Bank & Trust does not handle stocks and bonds and mutual funds, so Loftin said bankers are not fielding a lot of those kinds of questions. That means he can pull back for more of a big-picture view. 

“Ultimately, if the tariff situation stays as it currently is, it could be harmful to the overall economy,” he said. “For now, I would tend to agree with folks that are saying, ‘Stay the course,’ as we see what happens over the days or weeks to come.” 

Reached during the height of April’s market turmoil, Shawn Gallagher, a financial adviser and portfolio manager with Piatchek & Associates Inc., reported things were relatively calm in his office. 

“It’s not that bad because we kind of train our clients for this,” he said. 

The difference between the present moment and the 2022 market downturn, Gallagher said, is not its degree, but its suddenness. 

“In 2022, when the market went down, it was slower – you didn’t notice it,” he said. “This has been an immediate bottom all of a sudden. A week ago, it wasn’t like this.” 

As a result, he said, the issue is heightened in the media and in people’s minds. 

“We do a lot of retirement planning with our clients, and the plans incorporate activity like this,” he said. “It really takes a lot of meeting with them and going over everything with them, because human nature is to freak out.” 

Gallagher said a financial planner is always part psychologist, as clients panic and contemplate jumping out of the market. 

“We deal with it a lot,” he said. “If you’re balanced in your portfolio, a lot of losses are going to be mitigated by that mix.” 

Rebound anticipated 
Mick Nitsch, Missouri regional president of Regent Bank Inc., said though retail investors may be panicking about the financial markets, so far, he is not seeing people move their money out of 401(k) accounts. 

“History has taught us, and this is what we tell our clients, that the stock market has always come back from its declines, and we would expect nothing different this time around with the Trump tariffs,” he said. 

Nitsch said bankers thought tariffs would lead to lower interest rates, which would help with refinancing of consumer and commercial loans. 

“That has been slow to materialize,” he said. “Rates have been sticky and have not come down as fast as what we thought they would.” 

A drop in interest rates would help to restore consumer confidence in the financial markets, according to Nitsch. 

“Right now, the consumer has seen probably the worst of the impact of the stock market decline,” he said. “What we’ve been telling them is to continue to cost-average down on their investments and sit tight, and the markets will rebound in time.” 

By cost-averaging down, Nitsch said, the same allocation through a 401(k) contribution will go further today than it would have two weeks ago, as share prices drop. 

“Consumers typically sell at the very worst time to be selling,” he said. “If they were buying instead of selling, they’re setting themselves up for better returns in the future as the market recovers.” 

Nitsch’s personal opinion? The tariff situation will get resolved between now and August. 

“I think we’re going to see some kind of trade balance, where China agrees to buy a certain amount of U.S. goods each year to help reduce that trade deficit we have with that country,” he said. 

Time in market 
Jeff Jones, associate dean of the Department of Finance, Economics and Risk Management at Missouri State University, said some actions have created uncertainty, and uncertainty leads to volatility. 

“Right now, the market’s trying to figure out where all the tariff stuff’s going to go,” he said. 

Jones said the U.S. has had a rather stable market for the last few years, without a lot of volatility. 

“It’s been relatively calm since the COVID crisis, although 2022 was not a great year in the market,” he said. “There haven’t been a lot of truly exciting things. Now, we’re moving into a period where there’s a little more excitement.” 

But a few times during his interview for this story, Jones repeated a statement that had the ring of a mantra: “The important thing for investors to consider is time in the market generally beats trying to time the market.” 

From a portfolio management perspective, Jones said, an investor should ensure that investments are diversified across different asset classes. 

“With that diversification, as asset values change, are there any tweaks that need to be made to maintain your existing asset allocation?” he said. 

In other words, as an asset class goes down, it will shrink as part of the portfolio, and an adjustment may be called for. 

Asked about the practice of buying the dip – that is, timing a purchase of an asset for what is perceived to be a temporary moment of decline in the anticipation that it will recover – Jones said that can be a recipe for disappointment. 

“If you buy the dip at 10% and then the dip goes down to 30%, you feel like you’ve missed out,” he said. “If you’ve been fully invested the entire time, then you don’t have those same kind of dynamics.” 

Jones said investors in their 20s and 30s may feel that they have more luxury to make adventurous money moves than someone who is 60 and approaching retirement. 

“That’s a different animal,” he said. “You’re wanting to reduce volatility, and hopefully people in those positions have already done that. Instead of 100% equities, ideally, they have a mix.” 

Jones said the market has been pretty good for quite a while. 

“If you’d been through the [2008] financial crisis and what the markets did then, this is relatively minor compared to a 50% drop in equity,” he said. “Our memories tend to forget about that as time passes.” 

Jones said the U.S. economy still has a lot of strong financial indicators, even during a structural shift as the market tries to figure out tariffs. Even so, he said, some businesses are likely to wait before making substantial investments. 

“When there are higher levels of uncertainty, at least in business, oftentimes the end result is to do nothing,” he said. “They’re going to wait until there’s less uncertainty.” 

As for individuals, Jones agreed with Penney: People who don’t look at their retirement balances as frequently tend to have better performance because they are not constantly adjusting and making poor choices. 

“If I’m looking every day and reacting, that tends to result in poorer performance than having an asset allocation you can live with,” Jones said. 

Jones said the market will always have fluctuations; the keys for private investors are to diversify and not to panic. 

“Warren Buffett said it best several years ago: Don’t bet against the U.S. economy,” he said. “We have a very resilient economy, and in the long run it’s proven to be a very, very good investment.”