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Experts Share How To Navigate Trumpcession, Economic Anxiety
With every announcement that the Trump administration makes lately, it can feel like the U.S. economy is strapped onto a never-ending rollercoaster.
Take the ongoing saga of Donald Trump’s tariffs. Just this week, Trump said he was going forward with a 25% additional tariff on almost all goods imported into the U.S. from Mexico and Canada, and a 10% additional tariff on Chinese imports ― and the stock market plunged as a result.
But a few days later, Trump reversed course and is now pausing the tariff on many imports from Mexico and some imports from Canada for a month.
In his Tuesday address to Congress, Trump acknowledged that his tariffs might cause “a little disturbance.”
But for U.S. consumers, it can feel like much more. Already, people are feeling the effects of higher prices in grocery stores and retailers on everyday items like eggs, and are making changes to their budgets.
If you feel confused and anxious about what, exactly, Trump’s economic decisions mean for your wallet, you’re not alone. But don’t panic. HuffPost talked with personal finance experts and an economist about the most common questions on people’s minds right now, and if you should be taking action.
Are we actually headed toward a recession? What are the worrying signs?
When people spend less, the economy suffers, and right now, consumers are buying less, reports say.
Jesse Rothstein, an economist at University of California, Berkeley, and former chief economist for the U.S. Department of Labor, said some of the inputs that the Federal Reserve’s Atlanta branch uses to predict where our economy will be “have turned very negative recently, and that’s led them to sharply reduce their forecasts.”
In its recent March report, the Federal Reserve’s Atlanta branch reported that the economy was projected to shrink by 2.8%. This is a marked contrast from previous reports suggesting the economy would grow 4% from January through March. Declining consumer confidence reports are also indicating an economic slowdown.
Rothstein said he is “worried” that we are “really at risk for recession,” and he said the biggest risk factor is in how the so-called Department of Government Efficiency is culling thousands of federal jobs in its mandate to cut costs.
“That’s a lot of people who are out of work, who will cut back on vacations, who will cut back, who will miss house payments, who will fire their gardeners,” Rothstein said. “That then has ripple effects on the economy, because the hotels aren’t selling rooms, the gardeners are out of work, the restaurants are not doing well.”
Rothstein said the causes of the 2008 recession are different from what is pushing the current economic volatility: “2008 was kind of led by the housing market and by a financial system problem. This one seems to be led by intentional decisions made by the federal government,” he said.
If a recession does happen, it’s not possible right now to forecast how long it would last, Rothstein said.
What we do know for sure is that uncertainty changes people’s behavior. Rothstein explained that Trump’s “policy chaos” is causing uncertainty, and this worry causes consumers to buy less and businesses to invest less. “People pull back [from spending] because they’re worried, and that’s how recessions happen,” he said.
Alex Wong via Getty Images
If a recession does happen, here’s what you can do now to prepare.
What should I do with my stock market investments right now?
Amid this economic uncertainty, stock markets have taken alarming tumbles. But it’s a mistake to make a big decision based on a short period of stock market performance. This goes for your regular investments and your accounts like your 401(k).
“Just because the market is down one day doesn’t mean the economy is collapsing. If you have years or decades until retirement, what happens today is just a blip on the radar,” said financial educator Tess Waresmith. “The worst mistake you can make is to panic and cash out your investments or stop investing altogether.“
Waresmith said too many people pull their money out and wait for things to “feel safe” because they think they’ll find a better time to invest later.
But in reality, research shows investors fail when they try to time the market. In a 2023 report, financial services firm Charles Schwab looked at over 78 separate 20-year periods for investors and found that trying to time which month is best to invest is nearly impossible for most people.
“The best action that a long-term investor can take, based on our study, is to determine how much exposure to the stock market is appropriate for their goals and risk tolerance and then consider investing as soon as possible,” the report stated.
You shouldn’t take any drastic action with investments, but it might be a mistake to sit on the sidelines, too. For people who have money to invest, it can be savvy to buy stock prices when they are down.
“A downturn isn’t necessarily a bad thing ― it’s actually an opportunity. When stock prices drop, it means you can buy quality investments at a discount,” Waresmith said. “If you’re consistently investing, you get more shares ― pieces of companies ― for the same amount of money, which can significantly boost your wealth when the market recovers.“
You could also see U.S. economic instability as your opportunity to look beyond our borders for investments. If tariffs are going to stay in place, perhaps consider adding more international stocks to your investment portfolio, said certified financial planner Luis Rosa. “Other markets, like the European market and Japan, are likely to do well in the future.”
My 401(k) is fluctuating right now. Should I take action?
In this period of economic volatility, your 401(k) retirement account may look wildly different month to month. Rosa said some of his clients who live off of the money from their retirement savings have called him, panicking as a result of Trump’s actions.
But avoid making sudden decisions based on fear. In most cases, “resist the urge” to take action, Rosa said, because “if you look at the market, historically, it goes up more than it goes down.”
Especially if you’re younger, Rosa said, this can be an “opportunity” to be aggressive with your investments while your employer matches what you invest.
That’s because when you open a 401(k) retirement account, you can tailor your investment portfolio to your personal risk tolerance and goals. And when you are at the beginning of your career, planning for retirement decades later, it can help to be aggressive. Being “aggressive” in finance terms means investing in more stock funds, which can fluctuate a lot in the short term but can be a good long-term investment decades later.
But if you are closer to retirement age, this period of volatility could be a time to rebalance your portfolio toward less aggressive, less risky investments that are subject to less volatility ― like Treasury bonds, which do not fluctuate as much as stocks, Rosa said.
As you get closer to retiring, “You can let the larger part of the portfolio still be invested and go through the ups and downs, but you carve out a portion of it to serve as kind of that cushion” by having more stable investments like bonds, Rosa said.
With bonds, “the room for growth is not as much, but it’s a super extra safe way to invest,” said Jen Hemphill, an accredited financial counselor. But she recommends talking to a financial professional before you rebalance your portfolio.
What should I do right now, if anything, to prepare for a possible recession?
Regardless of whether a recession actually does happen in the near future, experts said it’s smart to build up your emergency savings fund right now.
To see how much money you need, first assess how much you regularly spend. Rosa said to look at the last three months of your credit card statements and see if there are subscriptions you’re not using.
Planning on making a big purchase? If you were already in the market for a new car, it might make sense to take advantage and buy before Trump’s tariffs go into effect.
You also don’t have to cut back on leisurely pleasures like vacations, but first see if your flights and hotels have cancellation policies in case you get laid off like many workers are, Rosa said.
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“The overall goal is to examine how your budget and financial decisions are going to impact the financial goals that you are trying to reach,” Hemphill said. She said that inaction or taking financial actions out of fear are the two biggest mistakes people make during times of uncertainty.
So if you’re feeling uncertain of what you should do, talk to a certified financial planner or counselor who can give you expert advice, she said.
They can help guide your financial decisions and answer the important question of: “Am I acting out of fear? Or am I acting because this is something I really want?” Hemphill said.
