Following the collapse of the dot-com bubble in the early 2000s, Lars Staack chose a more cautious approach by allocating his retirement funds into S&P 500 index funds, which offer diversification and are generally less risky than holding individual stocks.
This approach provided him with tranquility for over twenty years — that is, until President Trump’s election in November. As he scrutinized Mr. Trump’s proposals for broad tariffs, Mr. Staack, now 62 and retired for two years, felt his unease grow regarding the savings designated for his retirement.
Worries over how Mr. Trump’s economic strategies could impact the stock market pushed him to begin liquidating his index funds in January, reallocating those funds into bonds and Treasury investments, regarded as secure options during times of market turbulence. Currently, approximately one-third of his savings remain in stocks. The recent erratic fluctuations in the market — including its worst single day in months — have led him to contemplate shifting more of his portfolio into safer bonds, he noted.
“I’m grappling with what the best strategy is to safeguard my retirement funds from an unstable economy and looming inflation,” Mr. Staack remarked.
Financial advisors are reiterating their standard counsel during periods of uncertainty: Maintain your course, provided that your financial strategy is diversified and aligns with your objectives. However, this round of market volatility has unsettled individuals like Mr. Staack, who have a pressing need for their investments. He perceives stock market index funds as increasingly unsafe for pre-retirees or those already in retirement — individuals who plan to utilize their assets soon and lack the luxury of waiting for the market to rebound.
“What Trump and Musk have done is unparalleled, creating an impression that nothing is secure anymore,” said Mr. Staack, who resides in Poway, California, near San Diego, and shifted his political allegiance from Republican to Democrat after 2016.
In recent weeks, Wall Street’s outlook has grown increasingly gloomy in light of erratic political policies. By Thursday, the S&P 500 index had fallen 10.1 percent from a peak reached less than a month earlier, a downturn driven by investor anxiety over potential trade wars and significant federal workforce layoffs that might spur an economic downturn. This S&P 500 correction illustrates how the bull market that has persisted for two years is beginning to falter in the nascent stages of the Trump presidency.
Advisors have identified policy and political developments as key drivers of concern among clients. Nevertheless, not everyone is taking immediate action. Many advisors from prominent wealth management firms report that their clients are generally sticking to their existing financial strategies.
Most of the approximately seven million investors on the Vanguard brokerage platform have “remained disciplined,” mirroring past behaviors during market downturns, according to James Martielli, Vanguard’s head of investment and trading services. On Monday, when Wall Street faced its steepest drop this year, only 2.5 percent of Vanguard’s clients executed trades, with most opting to purchase equities rather than sell them, Mr. Martielli added.
“Currently, most clients seem slightly dazed but remain relatively comfortable with their positions and future prospects,” noted Mark Mirsberger, chief executive of Dana Investment Advisors, which oversees around $8.5 billion in client assets.
In discussions with clients, Rob Williams, managing director of financial planning and wealth management at Charles Schwab, observed that it’s often retirees and those approaching retirement who are particularly alert to stock market fluctuations and are expressing anxiety. The key question is how they will react.
For those nearing retirement, “reducing risk” may be a prudent choice, yet Mr. Williams cautions that when political factors influence decisions — which seems increasingly common — he advises clients to adhere to their strategies and “not react emotionally.”
Siegfried Lodwig, well into his retirement, hasn’t changed his strategy of maintaining approximately half of his savings in the stock market, managed by a financial services firm. He has faith that the market will ultimately recover, as it has consistently done in the past.
Nonetheless, Mr. Lodwig, 80, expressed concern over how much would remain for Amherst College, to which he intends to bequeath his estate, should the market continue its downward trend in the near term.
Andy Smith, executive director of financial planning at Edelman Financial Engines, is advising his clients against overreacting to troubling headlines regarding Wall Street’s fluctuations. Those with diversified portfolios and sufficient cash reserves for immediate needs can navigate their anxieties more easily, he explained.
“During turbulent times, it’s common for everyone to feel uneasy,” remarked Heather Knight, a national brokerage coach at Fidelity Investments. “Staying the course is the most effective method to endure these periods of volatility.”
However, for some individuals — especially those who foresee a need for their savings in the near term — the current economic turbulence feels distinct from previous market downturns, prompting a reassessment of their investment positions.
Praisely McNamara, a single mother with a 16-year-old son, decided to withdraw half of her 401(k) in February, the maximum allowable amount, even though it meant incurring substantial tax penalties. Employed in health care sales, she continues contributing to a Vanguard index fund. Nevertheless, with a mortgage and college expenses approaching, the economic volatility influenced by Mr. Trump’s policies led her to prioritize having liquid cash on hand.
As someone with limited savings, Ms. McNamara from Newington, Connecticut, mentioned that uncertainty regarding trade conflicts and job market stability fueled her decision.
“This marks the first time I’ve ever felt insecure regarding what I believed to be the most reliable approach to preparing for retirement,” said the 40-year-old, who supported former Vice President Kamala Harris.
The market volatility has unsettled even those Americans who do not anticipate needing to access their savings in the near future.
Alison Greenlaw, 43, is still a couple of decades from retiring. She and her husband purchased their home in Bloomfield, Connecticut, a few years ago. (Ms. Greenlaw is acquainted with Ms. McNamara through a community group.) Until three weeks ago, her 401(k) funds were allocated to a Vanguard target-date retirement fund, designed with a mix of stocks and other assets based on the expectation that she would retire around 2045.
However, as economic apprehension began influencing the stock market in February, she opted to transfer her entire 401(k) savings into a Vanguard money market fund, which features lower-risk investments such as government-backed securities.
“I’m aware that I won’t earn much there, but I’m not panicking like those whose 401(k) balances are depleting daily,” Ms. Greenlaw stated. “I feel relieved that I made the choices I did,” she added, especially in light of the recent market fluctuations triggered by tariffs.
Ms. Greenlaw sought to make an informed choice by consulting individuals in the financial sector whose views she respects. Many advised against making any moves. Yet, she felt uncomfortable adhering to the typical wait-and-see strategy, arguing that the current level of uncertainty in the U.S. feels “existential.”
On Tuesday, Stephen Dinan, 55, whose children are 5 and 7 years old, transferred their 529 college savings accounts from U.S. stocks and stock index funds into bonds and an international equities index fund. He also reallocated his 401(k) and his wife’s into bonds.
Mr. Trump’s unpredictable and aggressive policy stance has heightened Mr. Dinan’s concerns regarding market stability. A Democratic voter, he expressed hope to reinvest in stocks once the economic climate stabilizes or a change in administration occurs.
Financial professionals, he said, are “focused on the fluctuations within the game as it’s played,” but neglecting to consider the possibility of “the board game itself being taken away.”
