��ɫ��Ƶ

Editor's note: The S&P 500 spiked 9.5 percent Wednesday after President Trump announced a 90-day pause on proposed tariffs.��

U.S. financial markets continued their week-long roller-coaster ride Wednesday, rattling the nerves of the roughly who hold stock of some kind.

“Seeing trillions of dollars of wealth disappear from people’s retirement accounts in two days is pretty shocking,” said Shaun Davies, referring to last week’s market sell-off after President Donald Trump announced sweeping global tariffs. “Any of us who have logged into our 401Ks recently have had to get the Tums out.”

��ɫ��Ƶ Today caught up with Davies, associate professor of finance at the Leeds School of Business, to get his take on the recent stock market plunge, how worried we should be, and what’s to come.

Shaun Davies

Has anything like this ever happened before?

This is unusual, but not unprecedented. Not to bring up the Great Depression, but, we saw corrections like this in 1929. We saw them when France was taken over by Germany during World War II. We saw them in October of 1987, when, on “Black Monday,” the Dow dropped 22% in a single trading session, and again in the early 2000s with September 11 and the dot-com bubble bursting. The one that's most salient to most of us is the 2008 great financial crisis after the fall of Lehman Brothers, and there was a short little blip in March of 2020, during COVID.

Some might be tempted to pull their money out. What would you tell them?

Last week definitely blind-sided markets. Everyone knew these tariff announcements were coming out. But they were far more extreme than expected. When you see markets down 10% over two days, you say, I don't want to be a part of this. But it's really hard for an individual to time markets and know when to stay in and get out. One of the best things you could do is talk to a professional. When markets are up, nobody thinks they need financial advice. But during times like this, when they talk you off the ledge from doing something you’ll regret, they’re really valuable.

But why stay in?

You have to separate yourself emotionally from the investment and remember that, in exchange for our willingness to take risk, we earn compensation during good times. For example, in 2023 and 2024 the S&P 500 was up over 20%. That is compensation for moments like right now. Back in March of 2009, the market was plummeting. Everyone wanted to get out. But if you did, you missed one of the best bull runs in stock market history. Your goal is to build wealth over that long runway to retirement, where your good years offset your bad years and you make something like a 10% or 15% average return per year over that horizon.

What if your kid is going to college soon?

The 529 (college savings plan) is unique in that it's a relatively short horizon from when you start contributing to when you withdraw. If you’re concerned that tuition is due in the fall and you feel like you have a sufficient amount, it may be prudent to pull that money out, put it into something like a money market fund, where you'll still get a little over 4%, and at least you know you have that nest egg for tuition. Again, talk with your financial advisor.

What if you have cash to invest right now? Should you just tuck it under your mattress?

No. You definitely do not want to put your money under the mattress. We are in a period of relatively high inflation, still about 3%, so if you are just holding on to cash you are going to lose purchasing power because goods are going to go up in price. If you want something safe and short-duration, consider a money market fund, short-term U.S. Treasury bills, or short-duration U.S. Treasury Inflation Protected Securities (TIPS).

How is this different than past corrections?

2008 was a very scary time, because lots of governments, companies and pensions were holding bonds backed by things like subprime mortgages, and we had no idea what they were worth. In 2020, with the global pandemic, it was a quick blip with a quick recovery.

The concern here with these tariffs is the impact of all the uncertainty on the real economy. I can't imagine being a CFO of a fortune 500 company debating whether to take production on shore. You might make some huge capital investment, build factories in the United States, and then the U.S. tariff policy totally changes . If I were a CFO right now, I'd just be sitting on my hands, and that's going to have real implications. I imagine we're going to see corporations providing guidance that the next few years may not be as profitable. We're going to have supply chain disruptions. It could disrupt the labor market. Who knows?

How long will this craziness last?

There's a great gauge of volatility called the , which tracks the potential for volatility in the market over the next 30 days. The math is a bit complex, but one truism is that a high VIX corresponds with high anticipated volatility in returns. A normal VIX is between 15 and 20. This past week, we've seen the VIX around 50, which is huge. Buckle up. It’s going to be a roller coaster.