There have been so many terrible economic headlines that have numbed you over the past six months. Tariffs are rising! Without waiting, they stopped! Now they are back!
But I really brought the cake last Friday.
It starts with (currently) another tariff news. Comprehensive tariffs for all countries, and a bunch of other random quantities for a particular country. Switzerland has 25% in India, accounting for 39% and Canada has a top head up to 35% because we are not doing enough to stop makeup fentanyl that is not tilted on the border.
Then, the sensational U.S. employment report not only showed anemia job growth in July, but also made large-scale modifications to employment data for May and June. Remember when they reported a job increase of 150,000 jobs, they increased? OK, psychological! It’s actually close to 15K, or 90% from where they are. This makes the past three months the weakest work report in 16 years, second only to the pandemic.
Then, to really lift the crazy factor to 11, Trump responded to the evidence that his policy hurts the economy by firing economists in charge of the Bureau of Labor Statistics.
President Donald Trump fired Dr. Erika Mcentarfer, director of Labor Statistics, for alleging that he had no evidence to manipulate the “political purpose” of monthly work reports.
Trump mobilizes senior officials on work numbers, CNN.com
There is no other way to think of it as another way besides crazy reckless moves. Institutions like the Fed decide monetary policy by obtaining accurate information about the health of the economy, and now they no longer believe in BLS data.
If the U.S. economy is an aircraft, the unemployment data will be the fuel gauge, and last Friday it flashed a warning light and fuel was running lower. The president decided to eliminate the fuel gauge.
All of this means more volatility in the stock market and interest rates. We don’t know which way will go now, because we don’t know if the job market is healthy or stands out.
So, how should firefighters deal with this shocking new development?
Manage your cash
When times are scary and work seems to be shaky, it is more important than ever to look back at your debt and cash levels.
This means keeping your debt levels as low as possible. This means paying off as much high-interest debt as possible, and, more importantly, no longer getting stuck. Debt is like a pile of gasoline-soaked rags in your basement. Of course, it may not be dangerous now, but if the spark happens anywhere near that thing, po of! Your life rises in the flames. Now is definitely not the time to buy a house.
Second, make sure your emergency fund inventory is sufficient. This is usually putting 6 months of living expenses into a high yield savings account, and honestly, I will feel more comfortable at this point. The job market has deteriorated, with all these tariffs the impact of layoffs is likely to get worse, and when layoffs are common, it may take much longer to find a new job than usual.
Stay investing
It seems counterintuitive, but it is not the time to sell everything and go all out with cash.
If you are investing in a fire, your investment schedule will naturally be very long. At least, your investment vision has become the next decades. This is because even if you retire, you should continue to invest to keep the portfolio growing even if you exit it and get out of it.
As a long-term investor, you should ignore the day-to-day circumference of the stock market, and the big terrifying news reports that appear on feed. I don’t know what will happen tomorrow, next week or next month’s news. But I do know that as long as people get up every morning to work, they will continue to produce the goods and services people need. This creates value, thus creating wealth, and as the long-term owner of the company these people work on, wealth flows to you.
That doesn’t mean it will go smoothly. Stay away from it. Conflicts, natural disasters and trade wars will always ensure that the stock market and your portfolio will flee the exports in every subsequent disaster and will only return again after the dust has settled.
Short-term investors (such as one-day traders) try to predict and outperform these movements. But research shows that only a small percentage of investors can achieve this consistently.
Becoming a long-term investor is much easier. If you are lucky enough to avoid being liberated, ignore the news and keep investing (of course, your emergency fund is already full!).
2008 also seemed like a huge catastrophic event, but in hindsight, it was a huge buying opportunity. Buy any cash you can save on the market every month and you will eventually pick up more units at a discount when it rebounds (it Will be ) You will be able to be stronger than falling.
Remember, the world is bigger than the United States
As long as I have always been an investor, the center of the world economy has always been the United States. As the world’s largest economy and undoubtedly superpower, the U.S. economy sets the tone for the rest of the world.
This year has changed this dynamic.
As recessions in previous years were caused by wars, natural disasters or other unforeseen world events, the current market whipping is man-made and artificial. To eliminate tariffs and trade wars, you actually have (or rather) a very healthy economy in the United States.
While tariffs with each trading partner will certainly slow down the global economy, world governments around the world have responded to this protectionism by diversifying their trade and dealings with each other.
This has led to Canadian and European stock markets outperforming the United States this year.
Currently, the total U.S. market is up 5.7%. Canada’s TSX grew by 8.8% YTD. Europe, Australia and the Far East, tracked by the MSCI EAFE index, an amazing 15.6%!
If you follow our workshop portfolio, you have at least half of your equity allocated in the international market, which is a great move this year.
So even if Trump and his trade war dominate financial news this year, remember to invest in a globally diversified way to hedge any individual’s politics and thus land your retirement.
in conclusion
Market uncertainty is nothing new, and learning to deal with it is the most important skill you can gain as an investor.
After a variety of panic-causing market crashes, including the huge financial crisis in 2008, I learned that treatment is always the same regardless of the cause of the crash.
Avoid debt, keep expenses low and keep investing.
And you? Are you going to do anything different during this turmoil? Let’s hear it in the comments below!
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