US stock markets reacted sharply to the opening bell on Monday following news of US President Trump announcing tariffs on Canada, Mexico, and China.
The NASDAQ (.IXIC: INDEXNASDAQ) saw a significant drop, nearing a 2.5% decline at one point.
However, the market quickly rebounded after Trump withdrew the proposed tariffs following discussions with Canadian and Mexican leaders.
These tariffs have been suspended for one month.
While US markets showed signs of recovery on Tuesday, the trade tensions remain far from resolved.
China has responded to the initial US tariff announcements with its own set of tariffs, including a 15% levy on coal and liquefied natural gas (LNG).
Trump, on the other hand, described the initial 10% tariffs imposed on China as the “opening salvo”.
All in all, it’s been a rough start to February, to put it mildly.
A tweet away from a market decline
If you’re feeling dizzy from watching the day-to-day events unfold, take a step back and think for a moment.
Here’s the hard truth: the stock market can be a wild ride in the short term.
Ups and downs are a normal part of the game.
In fact, history tells us that market drops of 10% or more happen fairly often – roughly once every two years. These declines don’t occur like clockwork, of course, but it’s a pattern we’ve seen time and time again.
But here’s the good news: over the long haul, the market has a strong upward trend.
From 1980 to 2023, the market was actually up in 33 of those 43 years – that’s a whopping 76% of the time!
So, what’s the best way to handle these inevitable market swings?
In my opinion, the smartest move is to tune out the daily noise.
Let’s be honest: you can’t change what political leaders or countries are going to do anyway.
Similarly, obsessing over stock prices won’t change anything.
The market is going to do what it’s going to do. Instead of getting caught up in the daily drama, shift your focus to the companies you’ve invested in.
It’s earnings season anyway, so it’s a great time to dig into each company’s performance.
Read up on the latest business developments at Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT).
Both companies reported their results last week.
Or catch up with Alphabet’s (NASDAQ: GOOGL) financials released this morning.
That’s where your attention should be.
We submit that your time spent looking at the business rather than worrying about stock prices will be invaluable in the long run.
If the market decides to fall, you’ll be in a far better position as you have done your homework.
Get Smarts: A good reason to sell
Ideally, you should sell your shares when you achieve your financial goals.
That’s the best reason to sell.
At The Smart Investor, we’re lifelong students of investing.
We believe investing can bring so much to our lives.
At the same time, we don’t want to lose sight of a simple truth: investing is a vehicle to get you to where you want to go.
So, when you arrive there, it’s okay to get off.
As I’ve said before, you’re not successful when you beat the market or do better than your peers.
You’re successful in investing when you reach the goals you set out to achieve.
That’s the best reason ever to sell.
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Disclosure: Chin Hui Leong owns shares of Alphabet, Meta, and Microsoft.
