A lot has happened this year, yet we haven’t even made it halfway. With a new president in office, the headlines have focused on the many policies that have started rolling out. Hot-button topics like tariffs, deportations, and budget cuts are all at the forefront of Americans’ minds as they go about their busy lives. If the buzz of each news notification has left you feeling more uncertain about the state of the country, you’re not alone. In a survey that takes Americans’ pulse on the economy, including unemployment, prices, and wages, consumer sentiment was found to have dropped 30% between December 2024 and April of this year.1
It seems as though each week brings a new headline with trickle-down effects into the economy, specifically for the stock market. The year started off strong and steady, as most Americans felt hopeful about the changes to come with a new administration. But then the will-they-won’t-they game of tariffs led the markets on a shaky downturn. We’ve seen peaks that gave us hope and valleys that filled us with fear. While it’s impossible to predict how the rest of the year will unfold, periods of uncertainty often increase the likelihood of emotional decision-making, which can impact long-term financial goals. During times like these, it may be helpful to stay focused on your long-term strategy and make decisions based on facts rather than short-term reactions.
When investors make an emotional decision like pulling their money out of the market when it starts to take a nosedive, they risk losing out on big rebounds that help keep them on track with their big-picture financial goals.
Let’s take “Liberation Day” as an example. On April 2, President Trump announced 10% tariffs on all imports. For many investors who were caught off guard by such sweeping tariffs, the fear of higher prices, retaliation, layoffs, and even a recession caused a snowball effect of people leaving the market. The top U.S. tech companies, known as the Magnificent 7, lost over $1 trillion the next day.2 But after the initial shock, and as more trade talks continued, the market righted itself by the end of the month. Because knowing when and to what extent the markets will recover is impossible to predict, many fearful investors lost out on crucial gains once they decided to pull out.
Similarly, the escalating trade war with China led wary investors to pull hundreds of millions of dollars out of semiconductor companies earlier this month. They happened to do so right before the US and China agreed to reduce tariffs for 90 days, which sent the semiconductor sector surging.3
Emotional decision-making is a common response during periods of heightened volatility and uncertainty, especially when consumer sentiment is low. While stepping away from the market may feel like a protective move, history shows that making hasty investment decisions can increase the risk of missing potential long-term recovery. Some studies have found that investors who exit the market during downturns may face a higher likelihood of negative outcomes over time. That’s why it’s important to make investment decisions thoughtfully and with a long-term perspective. 4
During periods of market volatility, it can be helpful for investors to maintain perspective and focus on long-term goals. Historically, some of the market’s strongest gains have occurred shortly after significant declines.5 As a result, stepping out of the market during downturns may increase the risk of missing potential recoveries. Rather than reacting to short-term headlines or market swings, investors may benefit from reviewing broader economic indicators and considering how current conditions align with their long-term strategy. Distinguishing between short-term market sentiment and more sustained economic trends is an important part of making informed investment decisions.
The uncertainty of 2025 is far from over. To avoid falling prey to fearful selling and the inevitable FOMO when the market recovers, remember what’s most important — your long-term financial plan.
- https://www.cnn.com/2025/04/11/economy/us-consumer-sentiment-april
- https://www.cnbc.com/2025/04/03/mag-7-relinquishes-more-than-800-billion-as-tech-drives-stock-market-nosedive.html
- https://www.strike.money/stock-market/bulltrap-vs-beartrap
- https://finance.yahoo.com/news/traders-dumped-levered-semiconductor-funds-190757459.html
- https://www.etf.com/sections/advisor-center/financial-advisors-try-project-calm-during-market-plunges
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