Markets & tariffs in 2025: What retirement investors should know

Just a few weeks ago, we shared our outlook on markets in 2025, following two years of remarkably strong performance for U.S. stocks. At the time, the economy appeared resilient: inflation was gradually moving toward the Federal Reserve’s 2% target, unemployment was near historic lows, and the U.S. stood out as an economic bright spot compared to much of the world.

But, as is often the case with the market, things changed quickly. However, our investment philosophy does not — saving for retirement is a long-term game.

What’s happening now

Over the past few weeks, the Trump administration has taken several substantive policy actions:

Even though markets had weeks of warning, the scale and scope of these tariffs have shaken investor confidence. Global stock markets are down sharply. In the U.S., the S&P 500 dropped significantly — at a level on par with some of the most severe market corrections in modern history, including the early days of COVID in 2020, the Financial Crisis in 2008-2009, and Black Monday in 1987.¹

A guiding principle: Maintain a long-term perspective

If there’s one theme that can hold up across all periods of market turmoil, it’s this: long-term investors should consider staying the course. Historically, trying to time the market rarely works in your favor — especially when emotions are running high and U.S. trade policy seems to be changing by the day.

Right now, many economists are revising their forecasts for slower economic growth and the possibility of stagflation — a difficult scenario where the economy stagnates while prices continue to rise. That combination is especially tricky for the Federal Reserve, which has fewer tools at its disposal when it can’t simply lower interest rates.

But there are still reasons for cautious optimism. Just last year, the Fed pulled off what many thought was impossible: a soft landing, where inflation cooled without tipping the country into recession. We have also seen oil prices drop to four year lows, which could help offset inflationary pressures from the trade war. Additionally, valuations for US stocks, which had been stretched especially for large tech companies, are coming down to more reasonable levels.

What it means for your portfolio

At Guideline, our managed portfolios are designed for long-term retirement investing. The aggregate Guideline portfolio has about 80% stocks and 20% bonds, with a global allocation of 70% U.S. assets and 30% international. We also offer lower-risk managed portfolios that can be a better fit for people nearing retirement or those with lower risk tolerance.

If you’ve maintained a diversified portfolio and have been rebalancing consistently, you may be faring better than someone who went all-in on U.S. stocks after the last two years of growth. Rebalancing ensures you’re not taking on more risk than you intended — and that you’re potentially taking advantage of lower prices in areas that have dropped.²

Your behavior matters more than you think

Market volatility can be unsettling — even for seasoned investors. In moments like these, it’s natural to second-guess your strategy.

If you’re feeling unsure about your current risk level, it can be okay to adjust slightly. You may want to avoid making major changes in the heat of the moment. Market recoveries can be sudden and sharp, and missing even a few strong days can have a big impact on long-term returns. You can see this after the market bottomed out from Covid and the Financial Crisis.

In our opinion, one of your best tools right now? Consistency.

Most 401(k) investors contribute with each paycheck. This approach — known as dollar-cost averaging — spreads out your investment purchases over time, letting you buy more shares when prices are low.³

The bottom line

This is a challenging moment for the markets and investors. But it’s also a reminder of why long-term investing matters. By staying diversified, avoiding drastic moves, and continuing to contribute regularly, you may be giving yourself the best chance to weather this storm and benefit from future growth.

Warren Buffett put it best:

"The years ahead will occasionally deliver major market declines  —  even panics  —  that will affect virtually all stocks. During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy."