During the previous Trump term, the first thing I did every morning was look at the news on my phone – just to check he hadn’t blown anything up.
I made a deal with myself that I wouldn’t do that again through Trump Part II.
Well, that’s over, as is much of what we’ve taken for granted about the US-led international order that’s underpinned Western prosperity since World War 2.
Partisan bias causes people to be more negative about the economy whenever their ‘side’ is out of power. But at least in the past I always believed that any US President had a vested interest in the common good. There was always a hope their policy medicine could work, even if I believed it to be harsh, or likely to cause bad side-effects.
Sadly, Trump’s medicine is all side-effects and no therapeutic value. It’s the hydroxychloroquine of economics.
And this time, there’s nobody in Trump’s administration to tell him it’s a lose-lose idea. Or to at least distract him with some less important toy to break.
Trump tariffs tantrum
The market’s verdict is clear. Here’s the stock market slide as represented by various ETFs, with Trump’s Ruination Day tariffs listed per country (black text on each bar):
Equity ETF returns per country from 2 April to 4 April 2025. Source: JustETF. Not shown: 41% tariffs on the Falkland Islands, 0% on Russia, 50% on mighty Lesotho, 10% on Penguin Island.1 10% on British Indian Ocean Territory – inhabited by US and UK military personnel only.
Two things stand out, aside from it being a global bin fire.
Firstly, the US market is one of the worst affected.
Secondly, at the time of writing there’s little correlation between the size of Trump’s tariff and the impact on individual country stocks.2
For instance, the Australian market is down over 10% after a 10% tariff slap. Yet Vietnamese firms ‘only’ dropped 5.8%, despite Vietnam’s 46% tariff clothesline.
Meanwhile the UK’s FTSE All-Share lost 6.3% – even though we supposedly got off lightly.
Tis but a flesh wound
Nobody knows if Trump will walk some of this back or escalate. His advisors don’t know. He probably doesn’t know himself.
More to the point, nobody can predict how business and consumer confidence will bear up against the turmoil and anxiety. But it’s hardly the time to splash out is it?
Perhaps deleting all our news and stock market apps is the way to go – because here’s one way to view the decline:
A 4.6% loss since the start of January this year only sets the Slow & Steady portfolio back to July 2024. That doesn’t even rank among the top five worst quarterly losses in our model portfolio’s short life.
The portfolio’s worst drawdown was -14.9% in 2022. And we haven’t actually experienced a proper bear market loss since gunning up the portfolio more than 14 years ago.
That’s a blessing! But it also means that many of us haven’t been truly tested yet.
Risk matters
William Bernstein advises investors to use their first bear market as a reality check – a verification of your actual risk tolerance.
If you panicked last time, then Bernstein thinks you should ease back on equities and beef up your bonds so you’ll find it easier to handle the next go around.
But what happens if you haven’t previously experienced a bear market for equities – but you did recently suffer a hideous bond shock?
My guess is that some of us are in over our heads on the equities side, having grown leery of bonds. Perhaps we’re relying on diamond hands that could to turn to jelly in a real rout.
That happened last time during the Covid crash. Some of the Monevator community fled the field.
Granted, the market in March 2020 was going down like a lift with its cable cut. Yet equities bounced back within five weeks.
That was then…
If you’re feeling a grim sense of foreboding then I’m right there with you. But if you’re feeling scared or downright sick at the thought of what could happen next then you’ve got a couple of viable choices.
You could pare back a little on risk. Swap, say, 10-20% of your equities for bonds and/or cash.
Things could easily get even worse from here – though nobody knows for sure – so perhaps take a hit now to stave off being completely broken later.
Alternatively, brace yourself and hold on for dear life.
There should be a stock market pain simulator out there but this chart is the best I can do:
Bull and bear markets over time (US). Source: Vanguard
Take a long look at those negative numbers, and at how many years you might have to wait to turn the corner. Can you live with that?
If you can, then you should eventually be rewarded with one of the successive growth eruptions that dominate the chart.
Maybe sooner. Maybe later. Who knows where this goes next? The adults are not in the Situation Room.
But some day they will be again.
So if you’re not ready to bail, if you’re in it to win it, then you’re gonna have to take some pain. Grit your teeth, pull down your tin hat, and pledge that you won’t sell.
Here’s a fortifying tweet – quoting Barry Ritholtz’ new book – that might help:
There’s never any 100% guarantees. But history is on the side of investors who’ve held fast for the long-term.
How’s the Slow & Steady doing?
Everything is down in our model portfolio for the quarter, except for bonds. At least something is still working!
Here are the latest numbers (as of 4 April – a long time ago):
The Slow & Steady is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £1,310 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and find all the previous passive portfolio posts in the Monevator vaults. Last quarter’s instalment can be found here.
New transactions
Every quarter we throw £1,310 of red meat at the wild dogs of the market. Our stake is split between our portfolio’s seven funds, according to our predetermined asset allocation.
We rebalance using Larry Swedroe’s 5/25 rule. That hasn’t been activated this quarter, so the trades play out as follows:
Emerging market equities
iShares Emerging Markets Equity Index Fund D – OCF 0.2%
Fund identifier: GB00B84DY642
New purchase: £104.80
Buy 53.571 units @ £1.96
Target allocation: 8%
Global property
iShares Environment & Low Carbon Tilt Real Estate Index Fund – OCF 0.17%
Fund identifier: GB00B5BFJG71
New purchase: £65.50
Buy 29.39 units @ £2.23
Target allocation: 5%
Developed world ex-UK equities
Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%
Fund identifier: GB00B59G4Q73
New purchase: £484.70
Buy 0.752 units @ £644.76
Target allocation: 37%
UK equity
Vanguard FTSE UK All-Share Index Trust – OCF 0.06%
Fund identifier: GB00B3X7QG63
New purchase: £65.50
Buy 0.242 units @ £271.17
Target allocation: 5%
Global small cap equities
Vanguard Global Small-Cap Index Fund – OCF 0.29%
Fund identifier: IE00B3X1NT05
New purchase: £65.50
Buy 0.170 units @ £384.75
Target allocation: 5%
UK gilts
Vanguard UK Government Bond Index – OCF 0.12%
Fund identifier: IE00B1S75374
New purchase: £301.30
Buy 2.253 units @ £133.75
Target allocation: 23%
Royal London Short Duration Global Index-Linked Fund – OCF 0.27%
Fund identifier: GB00BD050F05
New purchase: £222.70
Buy 204.688 units @ £1.09
Target allocation: 17%
New investment contribution = £1,310
Trading cost = £0
Average portfolio OCF = 0.17%
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Take it steady,
The Accumulator
I think these reports are going to be even more interesting & relevant than usual for a good while/years to come with more then a few swings either way.At the start of the year i moved a fair percentage into the Royal London Short Term Fixed income Fund seeing it as comparable or just a small step up in risk to a MMF cannot say i regret the decision at the moment.
It’s likely to be quite a ride. The No Cat Food portfolio is going to certainly demonstrate sequence of returns risk …. Incredibly useful for those of us approaching decumulation. If you’ve not signed up for membership then what are you waiting for?
If only the 24 hour news cycle would restrain itself, perhaps a weekly summary of Trump, not minute-by-minute entertainment of the latest outrage.
Anyway, keep up the good work. I’ve joined up so looking for my Maven icon next to this post 🙂
Thanks so much for this. Always of huge interest – especially now! Would you mind sharing what the portfolio registered yesterday (7 April) before today’s mini bounce?
I’ve been thrashing around over the last couple of weeks and decided that a low volatility/FE Risk Score portfolio is best suited to my temperament and circumstances. (Concluded that the risk/return from Vanguard LS 60 is suboptimal for me.) It’s taken me a long time but I’m glad I’ve got there. Sleeping better at last!
I’ve compared a variety of possible portfolios (including xxd09’s) over a variety of time periods paying special attention to the following:
– return since Jan 1st 2020
– 10 year return
– return since November 5th 2021
– drawdown since Feb 15th 2025
– drawdown from 1st Jan 2020 to March 23rd 2020
I’d be interested in the Slow and Steady stats for the last 3 periods above.
@Grumpy Old Paul — Cheers for thoughts and I’ll leave @TA to comment directly on those returns, and whether they’re available.
However I’d just like to remind everyone that we’re not and never have claimed the S&S is some perfectly optimised portfolio for *anyone* let alone *everyone* 🙂
It’s a model portfolio, designed to show how passive investing and getting on with life can deliver a good return over the long-term.
When we began the series this was actually kind of controversial in some quarters, though younger/newer readers may find that hard to believe.
Now it’s a mainstream view, I’d say the longevity of the portfolio is its most salient feature.
So to that end I don’t think looking at the returns over those periods would give us much information, though I agree it might be entertaining/interesting.
And of course, the next three drawdowns will be different again. And the best allocation to go into them unknowable in advance. 🙂
I find the bull and bears chart you asked us to take a long hard look at rather reassuring.
The bears come in at 1.5 or 2 years approx. Thats not a long time. and bull years are much bigger and longer.
Im 80 equities 20 cash. sits comfortably with me.
Thanks for this. Most content has typically been panic or buy the dip. Only today am I seeing people discuss consider what’s happening in the wider context of your assets and what that means for them. If you’re heavy in stocks this may change that. There are nuances to your investment decisions – the generic sell or buy the dip advice is tiresome.
>Maybe sooner. Maybe later. Who knows where this goes next? The adults are not in the Situation Room.
But some day they will be again.
I’ll ride it out, but my greater fear is that the adults don’t return over the next decade. This Trump II term, plus a follow-on term by another MAGA leader could mean 8 or so more years of misguided incompetence….
@Grumpy OP – have you looked into the All-Weather portfolio? Much lower volatility than a 60/40 during previous hellfire drawdowns: https://monevator.com/asset-allocation-for-all-weathers/
Re: those numbers. Because the S&S portfolio uses funds (as opposed to ETFs), it takes quite a while to look up prices for each holding on specific days. But I can do it easily for an S&S proxy portfolio that uses similar ETFs instead of the funds:
– return November 5th 2021 to April 8th 2025: -1.5%
– drawdown Feb 15th 2025 to April 8th 2025: -8.3%
– drawdown from 1st Jan 2020 to April 4th 2020: -10.7% (this is the actual S&S portfolio, slightly different end date. The S&S proxy portfolio doesn’t go back this far as there wasn’t a short-term linker ETF available before April 2021.)
@ Paraquat – same issue as above, it’s quite laborious to record Slow&Steady positions day by day. I can do it in a jiffy though if you want to know the move between two specific dates for the ETF version. The caveat being that portfolio only coughs up dates from April 2021.
@Dawn – that’s good to hear. I too find that chart a source of comfort (albeit it’s based on nominal returns. Stay tuned for the 18-rated Monevator real-returns version coming soon.) Still, I remember how shocked I was by the notes of fear and distress that I heard from some during the Covid crash. And I’m conscious that I didn’t have that much at stake during the truly tectonic shock of my investing lifetime – the GFC. I like to think I’ll cope OK if the market drops off a cliff but I honestly don’t know.
@Nicole – agreed. All bets are off. Nobody has a clue.
@Lee – completely. I’m encouraged by the Wisconsin results. Assuming there are fair and free elections to come, then my guess is that the ensuing economic damage equals MAGA candidates getting whipped in the Midterms and 2028. Long way to go, though.
I’m around 60% equities at the moment and gradually “buying the dip” (maybe 6 months to get fully invested). I figure that if this is the great depression all over again I’ve got bigger fish to fry than the value of my portfolio. I’m more nervous about job security than stock valuation at the moment, but of course those are somewhat linked variables
@TA: Any thoughts on the whole “bonds no longer a safe harbour” kerfuffle? DT’s loosing its collective ‘mind’ over it in the midst of the Orange tornado’s tariff tantrum:
https://www.telegraph.co.uk/business/2025/04/09/trump-thrown-world-ultimate-safe-haven-asset-into-crisis/
On the AWP as an alternative to the S&S, over at Bogleheads someone ran a leveraged risk parity AWP christened ‘Profit Farmer’.
It did great in the back test since 1987, and for a while IRL too; but, as you’d expect with 3x leverage, it blew up spectacularly in 2022 (86% drawdown 🙁 ), although it’s showing signs of life since (Dual Momentum Systems website tracks this one, and there’s a lengthy Bogleheads thread).
@Delta Hedge — In the long-term US/UK government bonds may be wobbly if this turns into stagflation, but this week’s spike in yields I think is probably due to hedge funds deleveraging / getting out of carry trades etc.
@ northern lad
I’m accidentally ~60% in cash/short gilts due to sipp move and pref share cancellation. I genuinely don’t know if it’s fallen enough to get me interested.
Still feels like the S&P has 20-30% more to go – it’s only shaved 12 months excess off.
Great excitement in the stockmarket -once more! New investors finding out their sleepless nights/stomach acid levels -having to think about adjusting their Asset Allocations accordingly -perhaps not not a good idea to do it immediately in the eye of the storm -wait till a calmer period comes
Older investors ( myself 78+ rtd 23 yrs) find their chosen Asset Allocations getting tested yet again
I am sitting tight as usual -this requires investor discipline but it’s getting a lot easier as I get older
Hopefully it’s not Armageddon this time -it hasn’t happened yet so we will all probably be OK once more-eventually
xxd09
@Boltt – I feel the same way, that further drops are likely, but figure I’ll be more upset to miss the bottom than to lose more money following things down another 30%. Would probably need another 40%+ drop on top of where we already are to feel any regret about piling into equities. My inflow is still quite large compared to the overall value of my investments, which I think makes it feel very different to if I were close to planned decumulation. If we go down 50%+ overall, and if I can stay employed (this is the big one) then I’d be glad of the more ‘sensible’ valuations
Um, have you guys seen the market right now? 😉
Blinked and I missed it
It feels uncomfortable to be betting on which side of the bed Trump gets out of
Before I checked the Guardian website just now after looking up SPX on investing.com I thought WTAF.
Investors reacting to any vague sense of improving sentiment? An attempt at price discovery? BTFD on steroids? A successful short squeeze?
So it’s a 90 day reprieve. Hmmm.
Nearly up 9% though as of typing.
The last time that I can clearly & directly recall something like this was that 10% pop in a day in the Footsie when the FSA/BoE temporarily suspended short selling at peak fear of the GFC (a silly restriction BTW, IMO).
Crazy times.
Crazy President.
The only good thing which I can think to say about Agent Orange is that you do get your money’s worth when it comes to political ‘entertainment’ value with this one, although it’s the ‘thrill’ of a horror movie.
Crazy swings. Someone finally convinced him to listen to Dimon and co?
I was already agreeing with Ermine’s preference for ETFs over funds, to actually know what price you’ll pay, and that was before witnessing today’s turnaround.
@TI #13: I see that the BIS warned about the ‘basis trade’ and liquidity issues back in September 2023.
If it’s HF deleveraging now you’d think that the hedgies would have learnt from LTCM betting in 1997-98 on buying “off-the-run” and selling “on-the-run” bonds.
They were playing with 17x leverage. The basis points traders are doing 50x. What could possibly go wrong?
Then again, this one thinks it’s all down to the clearinghouses:
https://open.substack.com/pub/russellgclark/p/margin-call
2 months out from last day at work – doing my best to not give Tango any more oxygen than he sucks out of any room he enters! Although can be tough with minute-by-minute media monitoring!
Fortunately, moved 2 years cash to MMF in late Jan and have 2 yrs in short bond fund – rest in equities that aren’t needed right now, so zone out and carryon living. Wife is more concerned – but we all have different thresholds for worry.
KeepOnKeepinOn with your plans all – (try your best to) keep the faith!
What a guy! He’s singlehandedly boosted my portfolio today by 6% AND addressed the biggest issue threatening America today!
https://www.theguardian.com/us-news/2025/apr/09/trump-water-pressure-executive-order
And he’s got beautiful hair
Windy
Well that was indeed a rather sudden shift of the wind, but it can also shift just as quickly in the opposite direction. A 90 day pause gets us….hmm? I’ll be DCA’ing in either way but a big drop still seems about as likely as it did before. Fortunately the crystal ball being hazy doesn’t much affect my plans here
Mrs TA has never been so interested in the markets. Her verdict: “It’s mad.” Sounds about right.
For those of you with an interest in the last time a global empire, concerned about the loss of manufacturing to cheaper offshore competitors, played with tariffs, Dan Snow’s latest History Hit podcast goes into some level of detail, including the consequences for the party at the next election:
https://podfollow.com/dan-snows-history-hit/episode/c9b74e32c1120225f73c807951d585885c2473a4/view
(You can listen ad-free on various streaming services too)
For all my active talk I’ve generally been a passive panda previously, and not much reacted allocation wise to exogenous shocks like Covid.
However….
– We’ve now got an ideologically driven idiot in the WH whose sequence in the Presidency (45-47) could equally describe his IQ range.
– There are no longer any adults left in the room with him and the adminstrative guardrails (especially with a supine Supreme Court) look kinda loose 🙁
– It would take a two thirds vote of both houses of the Congress to overcome his veto on legislation in order to enact repeal measures removing Tango’s powers to impose tariffs (under section 232 of the Trade Expansion Act or section 301 of the Trade Act). That seems about as likely as a synchronised squadron of flying pigs.
– Vance seems pretty committed to Tango’s tariffs, so there’s a risk for beyond 2028 here (even assuming that the 22nd and 12th Amendments do actually bar Tango trying for a third term – there might be a loophole:
https://cornerstonelaw.us/22nd-amendment-doesnt-say-think-says/
– US relative and absolute equity valuations are not exactly a compelling buy under fundamental analysis, even after/with the recent sell off.
@TA #10,
Thanks for your reply and drawing my attention to Dalio’s All Weather Portfolio. Given that I’m trying to build a simple low risk/volatility “permanent portfolio” to see me through the current chaos and on into my dotage and having lived through 2022, I think I’ll give long gilts a miss.
As it happens I’ve been restructuring my ISA portfolio to try to meet my objectives and consequently had uninvested cash during April 9th’s fun and games and so missed out on yesterday’s US gains and today’s European and UK ‘echoes’! In the words of one of my favourite songs ‘Born Under a Bad Sign’, ‘If it wasn’t for bad luck I wouldn’t have no luck at all’.
I’m considering DCA-ing the cash into the IShares MSCI World Low Volatility ETF which seems to have lived up to its name. Will sleep on it for a day or two. The “safest” pillar of the portfolio is currently the Royal London Money Market fund currently yielding 4.72% but I’d consider switching to a 3-5 year gilt held to maturity if interest rates start falling hard.