Disclaimer: I am a long-term, mostly passive investor with about $250k in investible assets. I used to trade actively before realizing that a DCA-based passive investing strategy focusing on market and sector ETFs and mutual funds would probably outperform my stock picks. (It has; as it turns out, I'm bad at picking stocks)
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I am a lurker who has periodically read this and other personal finance subs for years. I have recently started reading this sub daily because I’m interested in how other people are responding to large market moves provoked by the Trump Administration. While this sub has had rich discussion about bull and bear cases since April 2, it often lacks the introspection I believe is necessary to make consistent, winning portfolio decisions over the long term. Here, I’m going to lay out my observations of this sub and pose some questions you can ask about your portfolio, regardless of your position in the market or political inclination.
Since April 2, this sub has been roughly divided into two camps - bears and bulls. Broadly speaking…
* Bears believe that the Trump tariffs (specifically) and the chaos caused by the Trump Administration (generally) will tank the market. Bears argue the most deleterious impacts of the Trump tariffs have yet to materialize, economic policy is unstable and therefore unattractive to investors, and consumers are spending less. Nobody knows what Trump will do next - and he is anything but a policy genius.
* Bulls believe that the market will continue to bounce back, perhaps even to new all-time highs as the Trump Administration strikes new trade deals. Bulls argue the most damaging tariffs have mostly been paused or rolled back, inflation is under control, and the labor market is healthy. The market always bounces back, and the underlying economy is strong - so what’s with the doom and gloom?
(You’ll have to forgive me if I come off as reductive here. I can only do so much to summarize a month and a half of this sub’s output in a few sentences.)
These are both reasonable arguments:
* Bears could be correct under many scenarios - e.g., if Trump capriciously decides to reinstate tariffs, especially on China, or if foreign investors flee the US, or if tariffs provoke an inflationary crisis, etc.
* Bulls could also be correct under many scenarios - e.g., if Trump really has seen the light, or if businesses have successfully planned for price hikes, or if consumers aren’t fazed by the potential for tariff-induced cost increases, etc.
My point: I would be shocked if I successfully guessed the direction of the economy and made the right portfolio moves to capitalize on it, and you should be shocked if you got it right too.
Regardless of your market thesis, I think there are intelligent questions you can ask about your portfolio.
* Bears: Suppose, for a moment, the bulls are right. What’s the opportunity cost of holding cash? If the market were to break through all-time highs by the end of May, would I feel bad about buying high? What’s my signal to re-enter the market or substantially reallocate my money to equities? Are there assets that I believe could be recession-proof, or at least recession-resistant, that I’m comfortable with investing in now?
* Bulls: Suppose, for a moment, the bears are right. If the market were to suddenly and unexpectedly drop 10% / 15% / 20%, how would my portfolio be impacted? What level of loss am I willing to tolerate? What about sudden changes in the top 3 single-name securities I own? What’s my strategy if the market crashes? Do I have cash to buy at a discount in the event the market drops?
And I think both camps can benefit from asking themselves: What do I need to believe for my market thesis to be correct? What do I need to believe for the converse to be correct? And do I have a backup strategy if I’m wrong?
In brief, I think this sub can be more humble and less declarative in the way it discusses the markets - which can hopefully result in more nuanced, less charged, and ultimately more profitable discussion.
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As for me, I'm agnostic because I don’t know which way the winds will blow next. I opted to increase my weekly contributions to my brokerage account just after April 2, focusing on small-cap ETFs, on the theory that these would be impacted disproportionately by tariffs and I would therefore buy at a steep discount - even better if the market continued trending downward or traded sideways. The market bounced back much quicker than I thought it would and my portfolio has broken even YTD. I’m a little sad equity prices have recovered so quickly; the best opportunity to buy, in my view, turned out to be fleeting.