People have avoided huge losses by holding old-fashioned, well-balanced investments, an approach our columnist is banking on for the future.
The mood has darkened in the U.S. stock market, and no wonder. Pessimism about the Trump tariffs has set off painful declines.
But the picture has been less dire for people with investments outside the U.S. stock market. Holding plenty of bonds and including stakes in international stock markets were keys to stability and, maybe, even modestly positive returns in the first three months of the year. While there is no guarantee that this approach will work as well in the future, it has held its own over many years and is, I think, a sound strategy for most people.
Just look at what we’ve recently experienced. The quarterly numbers from Morningstar, a financial markets research firm, show that old-fashioned diversified investments like those favored in retirement accounts posted much better returns than the big-name tech stocks, like Tesla and Nvidia, that had buoyed the U.S. stock market over much of the previous couple of years. Tesla, whose chief executive, Elon Musk, has become a lightning rod for critics of the Trump administration, lost more than 35 percent in the three months that ended on Monday. Nvidia, a star of the artificial intelligence boom, lost nearly 19 percent.
There were gains in the first quarter in many markets in Europe, Latin America and Asia, though stocks in those regions have joined in worldwide market declines lately, as the potential for grave global damage from tariffs has sunk in.
Pessimism in the markets is often a contrarian signal — an indication that it’s time for traders to start buying because, at least in comparison with prices before a market fall, bargains are out there. Certainly, sentiment about the U.S. stock market has worsened, both among rank-and-file investors and among people who view themselves as market experts.
But timing the market on this or any other basis is hazardous. While it’s possible that the latest declines will turn out to be a market bottom, stocks may still have a long way to fall, especially if President Trump’s tariff policy leads to a protracted trade war and a domestic recession. The chances of bad outcomes have increased appreciably in the eyes of erstwhile market and economic bulls.