Last week brought more volatility to the markets, fueled by rising concerns over new tariffs, stubborn inflation, and a potentially weaker U.S. dollar. S&P 500 fell 9.1% over the week, officially entering correction territory by declining more than 10% from its recent peak. This marked its largest weekly drop since the onset of the COVID-19 pandemic in March 2020. The tech-heavy Nasdaq index declined 10% during the week, pushing it into bear market territory with a total decline exceeding 20% from its previous high.
Many of us feel worried, especially with no clear end in sight to the uncertainty, and it’s natural to wonder: Should I do something? The key is not to panic—but to be thoughtful. Here are my thoughts to consider during times like these—and a few common mistakes to avoid.
What You Can Do: Short-Term Tactical Considerations
For Everyone
Revisit your spending and budget.
Market downturns are a good time to pause and review your household budget. Cutting back on discretionary spending and boosting emergency savings can strengthen your financial resilience.
Consider strategic tax moves.
Quick reminder: Always talk with your tax professional before acting on these ideas. These are strategies I often bring up with clients—especially when the timing aligns with their long-term plan.
Harvest losses. If you have investments that are temporarily down in value, consider selling them to realize a loss. You can use these losses to offset gains from prior years, and up to a limited amount per year ($3,000 in 2025). Hint again: consult a tax professional before acting.
Trim concentrated positions. If you’ve been holding a large, appreciated position (like company stock), now may be the right time to reduce it. You can use harvested losses to offset gains and reduce your tax bill.
Consider a Roth conversion. If converting a traditional IRA to a Roth IRA was already part of your long-term plan, a market downturn may make it more attractive. But proceed with caution: you’ll want to make sure it doesn’t push you into a higher tax bracket or trigger increased Medicare premiums (IRMAA). This is a strategy best reviewed with a tax advisor or financial planner.
Review your portfolio for inflation protection.
We are likely entering a longer-term period of higher inflation. To help offset that, you may consider adding Treasury Inflation-Protected Securities (TIPS) to the fixed-income (aka bond) portion of your portfolio. These bonds adjust with inflation and may help stabilize your overall return.
Additionally, exploring exposure outside of the U.S. strategically—with a potential weaker dollar in mind—can help diversify risk, especially for investors heavily concentrated in U.S. companies impacted by tariffs. Tariffs can disproportionately affect certain sectors and companies involved in global trade. Geographic diversification can help reduce exposure to those vulnerabilities. However, not all international markets will respond the same way to a weakening dollar or changing trade policies. Thorough research is crucial to identify regions and sectors that align with your investment objectives and risk tolerance.
These moves require careful planning and may not be available in all retirement plans.
Tip: If your 401(k) or 403(b) doesn’t offer TIPS, check whether your plan allows for a BrokerageLink (or similar feature). This gives you access to a wider range of investments through a brokerage platform like Fidelity or Schwab.
Longer-Term Strategic Moves
For Gen X and Parents of High Schoolers
If you’re a parent with a high school student heading to college in the next 1–3 years, market uncertainty may have you rethinking how to approach college savings and spending.
Here are a few things I suggest reviewing:
Reassess your 529 investment mix based on your timeline.
If your student is one to two years away from college, college savings should not be heavily invested in the market. I’m also not a fan of age-based options for short timeframes—many of them maintain too much exposure to equities and don’t provide enough downside protection.
Update your projected college budget to reflect rising costs.
Especially if you planned on using investments to cover expenses and have now experienced a drop in value. Make sure you model how much of the cost you can afford without sacrificing your retirement or long-term financial stability.
Don’t let emotions or prestige override financial realities—focus on value and fit.
College planning is part of the big picture—and it’s more important than ever to approach it with clarity and strategy.
For Retirees and Pre-Retirees
If you are in early retirement or 3–5 years away from it, I suggest revisiting your retirement income plan. I’m a long-time advocate of the bucket approach—a simple yet powerful way to align your portfolio with your spending needs:
Bucket 1: Cash or near-cash for the next 1–3 years of expenses
Bucket 2: Bonds and other conservative investments for the next 4–7 years
Bucket 3: Stocks and growth assets for longer-term needs
This method helps ensure you're not forced to sell investments at a loss during a downturn just to cover daily expenses.
What to Avoid
Panicking and selling everything. Market losses are stressful, but locking them in by selling makes them permanent.
Chasing recent winners. A stock or fund that held up well last week isn’t always a good long-term investment.
“Buying the dip” without a plan. Just because something is down in price doesn’t mean it’s a good investment or a fit for your portfolio.
Investing in something you don’t understand.
Final Thought: Stay Grounded, Stay Smart
Downturns are part of the investing journey—but with the right planning, they don’t have to derail your goals. Use this time to revisit your strategy, talk to your advisor, and make thoughtful decisions that will benefit you in the long run.
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