Psychology of Uncertainty: Staying Calm Amid Tariff News

Recent tariff news and market movements have created anxiety for many investors. How do we deal with this anxiety?  As humans, we are prone to Action Bias. This means we tend to favor action over inaction because it gives us a sense of control. Unfortunately, in the world of investing, this often leads to actions with negative long-term consequences.

Right now, we are dealing with a lot of unknowns. Even the most well-informed and educated professionals, such as Jerome Powell of the Federal Reserve, have acknowledged that. While we never know what the future holds, now is a particularly difficult time to make predictions. 

When taking big financial actions, we want to be well-informed and calm. As Morgan Housel, author of the Psychology of Money, often says, "good investing is about how you behave, not what you know. Investing rewards those who can sit still when everyone else panics.”

If you feel a desire to take significant action with your investments, start by focusing on how you behave and how you are feeling. It is okay to feel uncomfortable, the next step you take is critical. Do you let your feelings get the best of you, whether that is fear or greed, or do you seek perspective and slow down? 

Financial Advisors' objective advice is most valuable during times like these. The best advisors help you see more clearly, validate your emotions, and keep you focused on the long-term. It is easy to seek short-term comfort through actions like selling all your investments, only to feel long-term regret.

Positive years for stocks often come with significant pullbacks throughout the year. In fact, in the past 45 years, the average intra-year pullback in the S&P 500 is over 14%, yet annual returns were positive in 34 of those years. This does not mean this year will end positive, but it is a reminder that what has happened ≠ what will happen. 

Know that we and our extended market research team have been monitoring the situation closely. Below, you'll find articles from our Baird Market Strategy team and our macroeconomic experts at Strategas that are intended to provide context on the following: 

• An analysis on the recent tariff plan
• An explanation of the recent market selloff and what's next
• A way to personally process the news and consider your own portfolio amidst the uncertainty

We hope you find these insights are valuable, and know that our team is here for you – simply give us a call or send us an email and we'll be happy to support you through any questions you may have.