Investing / The Compound Effect
Selling Into a Storm: What Today's Market Drop Tells Us (and What to Do Next)
| 6 min | By Heath J. Harris
Markets tumbled after sweeping new tariffs. Here's what it means for your portfolio, your plan, and why staying the course still works.
Let us call it what it is: today was rough.
Markets dropped fast and hard after sweeping new tariffs were announced on foreign imports. The Dow fell over 1,600 points. The S&P dropped nearly 5%. The Nasdaq got hit even harder. In a matter of hours, the U.S. equity market lost over $3 trillion in value.
If you are feeling a little stunned, that is understandable. But if you have worked with us at Compound Advisory, you know we do not build strategies based on headlines. We build them to weather storms like this.
What Happened
A new round of tariffs was announced:
- A 10% baseline tariff on all imports
- Higher reciprocal tariffs (up to 50%) on countries with trade surpluses against the U.S.
This move triggered instant fears of a renewed global trade war. Investors hate uncertainty, and this was a massive dose of it. For anyone approaching or already in retirement, the immediate reaction was visceral: "Should I sell everything?"
The answer, almost always, is no. Here is why.
Who Felt It Most: Industry Impacts
This was not a gentle correction. The sell-off hit specific sectors hard:
- Technology stocks like Apple, which dropped nearly 9%, got crushed due to supply chain worries. These companies rely heavily on overseas manufacturing.
- Retailers such as Nike fell over 14%, anticipating rising costs that could either eat into margins or raise prices for consumers.
- Airlines and transportation firms saw their outlook dim, with fears that rising import costs on parts and fuel could squeeze profits.
This is exactly why diversification matters. It does not always feel heroic in the short term. But on days like this, a properly diversified portfolio built through sound wealth management saves you from catastrophic concentrated losses.
This Is Not New: History Repeats Itself
This is not the first time markets have reacted sharply to tariff news. In 2018, tariffs on steel and aluminum triggered panic. Pundits declared trade wars imminent. But within a few months, headlines shifted and markets resumed their climb. The S&P 500 ended 2019 up over 28%, despite early fears of economic fallout from tariffs.
And this 1,600-point drop? It is big. But it is not unprecedented:
- In 2020, we saw multiple 1,000+ point swings during the COVID crash
- In 2018, the Dow dropped 1,175 points in a single day over inflation fears
- In 2015, China devalued its currency and triggered a 1,000-point drop
In nearly every case, the market recovered within 12 to 18 months. Patient investors who stayed the course were rewarded. Those who sold into the panic locked in losses they never recovered.
Where We Go From Here: 6-12 Month Outlook
No one has a crystal ball. But here is what we expected over the following year:
- Supply chains get reshuffled -- Tariffs do not kill demand -- they shift costs. Companies work to restructure sourcing, pass along price hikes, or absorb some margin compression.
- Consumer goods and retail tighten -- Import-heavy sectors feel the squeeze. Expect trimmed forecasts and potentially slower hiring in some sectors.
- Retaliation is likely -- Other countries may respond in kind. That creates short-term headwinds, but also sets the stage for eventual negotiation or policy rollback.
- Markets stay jumpy -- Until we get clarity on the actual economic fallout, volatility persists. That does not mean it is time to sell. It means it is time to zoom out.
What This Means for Your Retirement Plan
Here is the bottom line: your long-term plan is still working.
If you are a client of Compound Advisory, you are already prepared for days like this:
- You have 12 to 36 months of cash or low-volatility assets ready for use as retirement income
- Your portfolio is broadly diversified across asset classes and geographies
- We use an active harvesting strategy to pull from strength, not weakness
- Your withdrawal schedule adjusts with market conditions
When you see red on your screen, remember: we are not selling into panic -- we are executing a strategy.
So, What Should You Do?
- Zoom out -- Volatility is normal. 1,000+ point drops happen. The S&P 500 has historically recovered from tariff-related drops within a year.
- Stay the course -- The cost of getting spooked is high. Missing the 10 best days in the market over a 10-year span can cut your return almost in half.
- Rebalance intelligently -- Market dislocations create opportunities. We look for tax-efficient ways to rebalance, harvest losses, and improve long-term positioning.
- Consider Roth conversions -- When your portfolio value drops, it can actually be an ideal time for a Roth conversion -- you convert at a lower value and pay less in taxes.
- Lean on your plan -- This is why we plan in advance. So we do not have to guess when the headlines get noisy.
Long-Term View: Still Optimistic
Despite the noise, the American economy remains resilient:
- Unemployment remains low
- Corporate earnings (outside of a few sectors) remain strong
- Consumers are still spending
Yes, tariffs cause friction. But like 2018, 2015, and even 2020 -- markets adapt. Supply chains evolve. Investors adjust.
Remember: volatility is the cost of admission for long-term returns.
At Compound Advisory, headquartered in Annapolis, Maryland and serving clients in all 50 states through virtual planning, we are not watching the news to make investment decisions. We are watching your plan to make sure it continues to deliver.
If you are feeling uncertain -- or if you want a second opinion on whether your current strategy is built for moments like this -- we invite you to schedule a complimentary Retirement Clarity Assessment. That is what we are here for.
Let us keep compounding,
-- Heath Harris
Founding Financial Advisor, Compound Advisory
Compound Advisory is a registered investment advisor. All investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.