Trump Stock Market Crash: What To Do?

Summary

Highlights

• The latest market sell-off linked to Trump's tariffs led to a classic risk-off movement. 🌍💱
• Risky assets like Bitcoin and the NASDAQ saw major declines, while safe havens like US Treasuries gained. 💣💹
• Historically, markets rebound quickly after sell-offs, providing hope to patient investors. 📈🔄
• Panic selling during crashes often results in missing the subsequent recoveries. 😱🚫
• Younger investors should see downturns as a discount shopping spree; retirees need a safety buffer. 🛍️💸
• Emotion-driven decisions are often harmful; keep a cool head and learn from each crisis. 🧠🌊

Key Takeaways

• Stay calm and look at the big picture; market sell-offs are opportunities, not disasters. 📉➡️💼
• Historical data shows markets generally recover quickly, so think long-term. 📊⏳
• Avoid panic selling; bad timing can leave you sidelined as markets bounce back. 🙅‍♂️🕒
• For younger investors, downturns mean buying opportunities; for retirees, a shift to safer assets prior is key. 👴🛡️
• Learn from market crashes to better understand your risk tolerance and improve future strategies. 🧘‍♀️📚

Overview

Chapters

• 00:00 - 00:30: Introduction to Stock Market Crashes The chapter discusses the emotional reactions that can occur during stock market crashes, which often lead to poor decision-making. It aims to provide a detached perspective on understanding current market conditions, implications for future stock returns, and practical advice on what actions to take. The advice given will be applicable to future market sell-offs as well. The video encourages liking and subscribing if the content is helpful.
• 00:30 - 01:00: Current Market Sell-off Analysis The chapter analyzes the current market sell-off with a focus on the performance of various exchange-traded funds and Bitcoin since the inauguration of President Trump in 2025. The discussion highlights the impact of consecutive tariff announcements, which have led to a gradual sell-off in risky assets. This trend recently culminated on 'Liberation Day' when a broad range of tariffs were implemented, causing a significant market reaction.
• 01:00 - 01:30: Impact of Tariffs on Global Markets The chapter discusses the impact of tariffs on global markets, highlighting that risky assets such as NASDAQ tracker and Bitcoin have sold off sharply. Oil prices have also dropped due to anticipated weaker global growth resulting from the tariffs. High yield bonds and emerging market sovereign bonds are similarly affected. However, short duration US treasuries, acting as a hedge, remain stable amidst the market volatility.
• 01:30 - 02:00: Safe Assets in Risk-off Periods In this chapter, the focus is on the movement of safe assets during risk-off periods. Specifically, it highlights that TLT (long duration US Treasuries) has experienced a rally, and there was a significant rally in gold leading up to a recent liberation day announcement. However, gold has been selling off since then. This movement is seen as a typical 'risk-off' pattern, where investors move their capital from risky to safe assets. This shift is attributed to expectations of lower future growth in both the economy and corporate earnings, largely due to the impact of tariffs.
• 02:00 - 02:30: Sector Performance during Sell-offs In the chapter titled 'Sector Performance during Sell-offs', the transcript discusses the behavior of different investment styles during market sell-offs. It highlights that defensive investment styles, such as low volatility, large cap value, high dividend yield, and quality, tend to perform better and lose less value during these periods. On the other hand, growth-oriented and riskier styles like small cap growth, growth in general, and small caps have shown a more significant reversal or sell-off. This broad-based sell-off analysis underscores the varying impacts on different sectors based on their investment style.
• 02:30 - 03:00: Unusual Dollar Response The chapter "Unusual Dollar Response" explains how the sharp selloff in equity markets is aligned with a risk-off scenario where defensive sectors like consumer staples and healthcare fare better than others. However, the surprising element is the simultaneous selloff of the dollar, which contradicts the typical pattern during market risk pullbacks where the dollar usually strengthens as investors seek a safe haven.
• 03:00 - 03:30: US Market Valuations The chapter titled 'US Market Valuations' discusses the dynamics of the US dollar in the context of it being considered a safe haven currency. The conversation points out a concerning trend from the US perspective: during a market selloff, instead of strengthening, the dollar has actually weakened against major currencies like the euro and sterling. This is visually represented by blue bars indicating the dollar's decreased value in comparison to these currencies.
• 03:30 - 04:00: Media Influence and Long-term Perspective The chapter discusses the fluctuations in currency exchange rates, specifically focusing on the weakening of the US dollar against the Swiss Franc and the Japanese yen, while it has gained value against the Australian dollar which is affected by commodity prices. It highlights the current valuation of the S&P 500 index, noting its price to earnings multiple over a forward 10-year period. Although the S&P 500 is not cheap, it is also not as overpriced as it has been in the past, indicating a change in market valuation during this period. The chapter suggests checking a live graph for updated information.
• 04:00 - 05:30: Historical S&P 500 Recoveries The chapter focuses on the benefits of being a premium member on a specific website, emphasizing access to financial trackers and tools such as Schiller CAPE, CAPE by Country, and the UK yield curve, which are interactive and useful for monitoring market sell-offs. Additionally, members have access to a chat application for asking questions during market fluctuations, providing reassurance during uncertain times. For more information, the reader is directed to visit pensioncraft.com/membership.
• 05:30 - 06:00: Market Timing Challenges The chapter 'Market Timing Challenges' discusses the recurring media narrative during sharp and severe market selloffs. It emphasizes that despite the doom and gloom portrayed by news outlets during these periods, it is crucial to remember that global stock funds historically bounce back. The transcript critiques news stories for focusing on short-term sharp falls in stock markets without providing the context of the longer-term picture of market recovery.
• 06:00 - 07:30: Investment Strategy for Different Life Stages The chapter discusses the long-term nature of stock investment and cautions against panicking during market downturns. It highlights the tendency of media to sensationalize market declines, which can lead to unnecessary panic among investors. The chapter advises maintaining a calm perspective and understanding that market fluctuations are a normal part of investing, especially during different stages of life.
• 07:30 - 09:30: Emotional Decision-Making in Crises This chapter discusses the impact of emotional decision-making during crises, particularly in financial markets. It uses historical data from the S&P 500, going back to 1920, to illustrate how emotional responses can often lead to selling at inopportune times, such as during market sell-offs. A logarithmic scale is used to better present the large returns over time. The chapter includes analysis of the extent and duration of S&P 500 declines from its all-time highs.
• 09:30 - 11:00: Learning from Market Crises The chapter titled 'Learning from Market Crises' discusses the recovery patterns of the S&P 500 following market downturns. Over the course of a century, the S&P 500 has typically taken less than a year to recover its previous all-time high after a sell-off. Contrary to common belief, long recovery periods are rare, with only two instances taking over a decade.
• 11:00 - 11:30: Conclusion and Community Invitation The chapter discusses historical economic events and their recoveries, focusing on two significant occurrences: the US oil shock of 1973 and the dotcom bubble around 2000. It highlights the duration it took for the stock market to recover and exceed previous highs considering real total return, inclusive of inflation rates, which posed an additional challenge to recovery.

Trump Stock Market Crash: What To Do? Transcription

• 00:00 - 00:30 when stock markets crash it's easy to let emotion get the better of us and this often results in bad decisions so in this video I'll try to take a step back look at what's happening and why but also what this means for future stock returns and most importantly what we should do about it if you do find this video helpful please like it and consider subscribing to our channel now what I'm about to say applies generally to market sell-offs in the future but
• 00:30 - 01:00 let's look at this specific sell-off that we're seeing as I make this video so here you can see the returns on various exchange traded funds showing various asset classes and also Bitcoin since Trump's inauguration this year in 2025 as we've had each announcement about a new round of tariffs you can see that risky assets have generally sold off and that culminated most recently with what Trump called Liberation Day which was widespread tariffs applied
• 01:00 - 01:30 globally so risky assets sold off qqq the NASDAQ tracker sold off very sharply as did Bitcoin oil sold off because that's a commodity that relies on growth and the expectation now is that global growth will be weaker as a result of these tariffs and if we look at high yield bonds those have also sold off along with emerging market sovereign bonds on the plus side the usual hedges are working so short duration US treasuries SHY that's been rock solid
• 01:30 - 02:00 tlt which is long duration US treasuries has rallied and leading up to this liberation day announcement gold rallied hugely but it has been selling off since then so the overall pattern is a classic riskoff move people have moved out of risky assets and put their money into safe assets and that's because of expectations of lower future growth both economically and in corporate earnings in the future as a result of tariffs and
• 02:00 - 02:30 the sell-off's been fairly broad-based for example if we slice the US market according to the investment style you can see that the styles which are most defensive have sold off least so that would include low volatility large cap value high dividend yield quality for example and the more growth oriented and riskier styles things like small cap growth growth in general small caps in general all of those have reversed quite
• 02:30 - 03:00 sharply and if we break it down by sector it's a similar story defensive sectors like consumer staples and healthcare have done okay and the sectors which have been responsible for a lot of the growth of the S&P those have sold off most sharply now I'd say what's most shocking about this selloff is not about what's happened in equity markets which as I say is classic risk off it's the fact that the dollar has sold off as well typically what happens during a risk pullback is that people
• 03:00 - 03:30 flock to the dollar as a safe haven currency what's really worrying certainly from the point of view of the US is that the dollar has not rallied during this selloff it's weakened significantly against a lot of the other major currencies remember that the way these are quoted varies between currencies so the blue bars at the top you can see that the dollar's weakened versus the euro and sterling and the two bars at the bottom show that it's also
• 03:30 - 04:00 weakened versus the Swiss Frank and the Japanese yen although it has rallied against the Aussie dollar which is a commodity currency now as of the close on the 4th of April if we look at US valuations you can see that the S&P is no longer egregiously expensive as it was previously it's at roughly the 10-year forward price to earnings multiple so not cheap by any means but certainly not as expensive as it was and if you did want to see the live version of that graph you can do that as one of
• 04:00 - 04:30 our premium website members plus you get access to lots of the other trackers Schiller Cape Cape by Country also the UK yield curve which is interactive where you can find one of those hedges if there is a big sell-off and also our chat application so you can ask a question whenever you want that can be quite reassuring during one of these market wobbles if you did want to find out more about that just go to our website pensioncraft.com/membership and you'll
• 04:30 - 05:00 find a link to that in the description below now as always happens when there's a market selloff that's very sharp and severe we're bombarded by news stories about doom and gloom and the most important thing to remember I think is that global stock funds always bounce back so in news stories you'll be seeing graphs like the one shown beside me here a very sharp fall in stocks but what these news outlets never do is to show you the longer term picture which is
• 05:00 - 05:30 zoomed out which shows how stocks have rallied hugely over the long term and taken in that context recent falls simply aren't as significant i get it these news outlets need clicks they need attention and Doom porn is very popular you'll see it on YouTube as well but that gives a misleading picture about how to respond to these crises because it makes you think that you should panic that it's okay to panic furthermore it
• 05:30 - 06:00 may make you do exactly the wrong thing which is to sell during these market sell-offs so let's dig into those statistics for the S&P 500 and fortunately here we have a century of data to look at so this goes all the way back to 1920 and I've had to use a log scale on the y-axis because the returns have just been so huge so what I've done here is I've annotated when the S&P 500 fell from its all-time high how far it fell but also how long it took to
• 06:00 - 06:30 recover its previous all-time high so over this century long period there have only been 15 episodes where the S&P didn't recover its previous all-time high within a year now if there's a large sell-off people assume that it takes a very long time for the S&P to recover its previous high but as you can see that's not usually the case there are two episodes where it took longer than a decade for the S&P to reach its previous all-time high but over a period
• 06:30 - 07:00 of a century that's pretty good odds one of those episodes started in 1973 and that was to do with the US oil shock and the second one was the dotcom bubble around the year 2000 now in those two episodes it took 11.9 years and 12.7 years to regain the previous all-time high and this is real total return so not only did stocks have to recover their lost ground they also had to beat inflation which was even harder now what this graph tells me is that usually the
• 07:00 - 07:30 S&P snaps back to its all-time high very quickly if you sell at the first sign of trouble it's often the case that you'll be locked out of markets and you'll just be watching markets snap back and you'll have to buy back at a loss very rarely we see these decadel long sell-offs twice in the last century but those are very rare now the reason why it doesn't usually make sense to sell during one of these market crashes is that you have to
• 07:30 - 08:00 time two things correctly the sale and the repurchase of equity and timing those two things correctly often doesn't work so let's look at one of those big market sell-offs and this is the dot bubble bursting now there it took the S&P 7 years to recover its previous all-time high so you might have thought you'd have plenty of time to buy back into the stock market so if we look at the 2020 selloff the COVID selloff it took just 7 months to regain its previous all-time high so when we're
• 08:00 - 08:30 just starting to see one of these sell-offs firstly we don't know whether we're going to get all the way down to a 30 40% sell-off it's impossible to know the scale of the sell-off as it's happening it could be that the market snaps back very quickly and given that the current sell-off is driven by very uncertain policy announcements from the United States it may be that we get a very rapid reversal of policy and markets snap back for example so that
• 08:30 - 09:00 makes it really difficult to know when to get back into the market if you've sold another big difference is whether you're still in the accumulation phase where you're saving for retirement or whether you've already retired now if you are someone who's in their 20s their 30s their 40s even their 50s and as you can see from my gray hair I'm in my 50s it's actually a great thing when markets rerate downwards and that's because you're still buying if it's money that
• 09:00 - 09:30 you're going to keep invested for say 20 years and not touch then it's very likely that you'll be buying at a huge discount relative to where you'll end up after 20 years another way to think of it is imagine you had a telephone and you could talk to yourself in the past and you could talk to yourself during the global financial crisis when things were looking really awful what would you say would you be saying sell no you'd be saying buy as much as you can this was a
• 09:30 - 10:00 huge discount and things get better similarly if you could talk to yourself 20 years in the future from now I suspect you'd be hearing something quite similar so learn to recognize these crashes for what they are which is a sale you can buy the things you want to buy more cheaply if you were willing to buy the S&P when prices were 20% higher then surely you'd be willing to buy the S&P at these cheaper prices but what about if you're in retirement well
• 10:00 - 10:30 that's slightly different because firstly your horizon's shorter plus you're having to sell some of your investments to live now this is why we always say that it's good to derisk just before retirement maybe five years before and that way you could live off your safe investments for some period of time without having to crystallize a loss on your equities and by living off your safe bucket for some period of time equity has time to recover because if you're withdrawing from a pension pot
• 10:30 - 11:00 which is harved in size then effectively what you're doing is doubling the withdrawal rate in percentage terms and that depletes your pot much more rapidly now if you haven't set aside some low-risk assets before this happened then it still doesn't make sense to sell all of your equity and that's because you'll miss the bounceback which almost always occurs after a crash remember the largest stock market returns the positive ones often go hand inhand with the large negative ones so if you're out
• 11:00 - 11:30 of the market you won't get the uplift but if it is the case that you haven't set aside low-risk assets like money market funds or cash or government bonds to live off during these crises then what you can do is simply spend a bit less you will be crystallizing some of your equity but you'll deplete it more slowly another key point is that emotions make for poor decisions now I speak to a lot of people onetoone and
• 11:30 - 12:00 during these sell-offs I speak to a lot of people they often want to talk to me to discuss their investments but also to talk about losses on paper at least and often they're in quite an emotional state understandably they've just watched their life savings dwindle hugely and this is a nice example of how we've evolved not to be good investors we shy away from fear because that's a sensible thing to do when you see a house on fire you're not going to run into it and yet that's exactly the
• 12:00 - 12:30 optimal behavior you want to put your capital at risk when you can buy equity at a discount now different people cope with this in different ways some people keep an investment journal where you write down what you're planning to do i'm going to sell all my equity for example and then in the cold light of day the following day you review what you wrote and usually that process of being more objective stops you from doing crazy things like selling after a market crash but really you've got to
• 12:30 - 13:00 find what works for you to keep you sane and rational perhaps meditation helps you perhaps walking your dog i find that very helpful whatever it is that works for you do it and don't respond emotionally to what's going on in markets because that'll almost certainly damage your wealth and finally use this crisis to learn now no two crises are ever the same there's usually a different cause the size and the scale and the speed of the sell-off is always
• 13:00 - 13:30 different but your reaction to it is something you can learn calibrate your risk appetite people often tell me "Yeah I'm fine with market selling off i don't have a problem with it." But then after a crash I get a call from them and they say "Yeah I sold." Because it's really hard to imagine how you'd feel if equity markets sell off so use this experience and your reaction to the selloff to gauge what your risk appetite actually is in practice and use that to build
• 13:30 - 14:00 your long-term portfolio after the dust has settled and markets return to normal because what you can bet is that we'll have another sell-off which is potentially even more severe in the future so I hope that's put your mind at ease when it comes to how you should respond to these market sell-offs remember reacting in haste emotionally without thinking about what you're doing without zooming out and looking at the
• 14:00 - 14:30 long-term return for equity markets is probably a mistake now remember that if you did want to join our community you can do that really easily just go to our website pensioncraft.com/membership to learn more and as always thank you for listening