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The Simple Strategy to Survive Trade War Volatility
Buckle Up for More Volatility
Teeka Tiwari
February 10, 2025
The Simple Strategy to Survive Trade War Volatility
Trade wars are nothing new for President Trump.
During his first term back in April 2018, his administration announced 10% tariffs on $200 billion worth of Chinese goods. By the end of the year, it increased to 25%.
The White House published a list of thousands of Chinese products that would be subject to trade penalties, including washing machines and leather goods. And it vowed to inflict more economic pain if Beijing took any retaliatory measures.
The market swooned on the news. The S&P 500 and Nasdaq dropped 11% and 12%, respectively, from January-April 2018.
The immense volatility unnerved many of my readers. And I received hundreds of anxious emails from them about a potential U.S.-China trade war.
Here’s what I wrote at the time:
I’m not worried about a full-scale trade war breaking out. I think President Trump is posturing for a backroom deal later this year. But the market is discounting a trade war. That brings me to one of the biggest mistakes professional investors make. They try to figure out what every headline means for the market.
All you should do when looking at the markets is look at the big picture. [Emphasis added.] And the big picture is that President Trump’s tax cuts have spurred the economy. We’re seeing employment, wages, and profits rise. All of these are incredibly bullish for stocks.
Despite a fundamentally sound economy, both sides continued to engage in saber rattling.
By June 2018, China had retaliated with its own tariffs on $50 billion worth of U.S. goods. President Trump then threatened a second round of sanctions against China.
“After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” he said at the time.
With trade war headlines consuming all the oxygen, the market started gagging. After climbing to a high of 2,947 in September 2018, the S&P 500 plunged to a low of 2,317 in December.
Again, I received worried letters from my readers. And again, I told them to focus on long-term fundamentals, not short-term chest-beating by national leaders:
This type of volatility is normal. And the best way to handle it is to do nothing at all. Go and enjoy your summer. Forget the trade war.
There will always be something going on in the market to fret about. But who cares? It won’t mean a thing if the market reaches a new high again in three months. Unless you’re a day trader, none of this daily volatility should bother you. I still believe a trade deal will get worked out at some point.
So don’t get sidetracked by the noise. Just focus on the big picture… and understand we’re in a long-term uptrend in stocks. [Emphasis added.]
One year later in December 2019, the S&P 500 hit a pre-COVID high of 3,263. That’s a 41% gain in 12 months. And no one cared about what happened in April or August 2018.
Friends, when it comes to investing in any asset, for me it all starts with the long-term trend.
I ask myself if the market’s long-term trend is up or down. If it’s up, the solution to volatility is simple: Buy the dip.
And that’s exactly what we have happening with crypto right now.
Tariffs Have Nothing to do With Crypto