Money Rehab with Nicole Lapin
Market Downturn Explained and Bear Market Investment Strategies
Mon, 07 Apr 2025
The market just took a nosedive, and tariffs announced by President Trump are at the center of it all. In this episode, Nicole breaks down how those tariffs rattled the global economy, what that means for prices and industries here at home, and—most importantly—what you can do to protect your hard-earned money. She'll share why she's still bullish on the long-term market outlook, how to take advantage of the dip, and the funds worth watching if you're creating a portfolio built to last. 00:20 Understanding the Market Crash 01:12 Impact of Tariffs on the Market 04:06 Investment Strategies During a Downturn 07:39 Recommended Funds to Research 09:29 Final Tips
Chapter 1: Why are tariffs causing a market downturn?
The short answer is tariffs. As we know, President Trump announced a sweeping new set of tariffs last week on Liberation Day. And these tariffs were much more aggressive than what was expected on Wall Street. A baseline 10 percent tariff is now in place for nearly every country and dozens are facing even steeper rates.
Chapter 2: What are the immediate effects of tariffs on global markets?
China, for example, got hit with another 34% tariff on top of a 20% tariff already in place, bringing their grand total to 54%. These new tariffs were a full-blown trade war escalation. Countries hit with U.S. tariffs didn't wait long to strike back. China slapped 34 percent tariffs on all U.S. goods and blacklisted 11 major U.S. companies.
Europe, Canada, Mexico and others are prepping or have already enacted retaliatory tariffs. The things we can expect to be more expensive are as specific as avocados, tomatoes, strawberries, beer, whiskey, champagne to more general categories like cars, electronics and clothing. So kind of everything.
These announcements triggered global panic, sent major economies scrambling to respond, and wiped out trillions in market value. Stocks plummeted across the board. Tech got slammed, with Apple down more than 13 percent over the week. Caterpillar, which is a bellwether for global industries, fell nearly 11 percent. And it wasn't just equities.
It was oil, copper, gold, crypto, and even the dollar got caught in the sell-off. The ripple effects are hitting industries like tidal waves. Representatives from banks told The New York Times that in this economic climate, it would be too risky to underwrite a big merger or IPO. Two highly anticipated upcoming IPOs, Klarna and StubHub, were paused and many others were paused or pulled altogether.
With the market itself providing dwindling returns, we could expect PE and VC to pause big fundraisers as well. So it makes sense why tariffs hurt consumers. But why was the stock market hit so hard? As a reminder, tariffs are paid by companies that import the goods, not foreign governments. So let's make up an example. Say Target imports a backpack from China that costs $25.
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Chapter 3: How do tariffs impact consumer prices and company profits?
Under the new policy, China now faces a 54% tariff. So that means Target now owes $13.50 in tariffs to the U.S. government for every single backpack that it imports from China. So what does Target do? The company has a few options, of course.
It can try to renegotiate the cost with the Chinese manufacturer and pay less per backpack, or it could eat the $13.50 cost itself, which is a serious blow to its profit margin, or more likely, it could raise the price of that backpack for consumers. It's clear how that would impact a consumer, of course, but this is also the answer to the question of how tariffs impact the markets.
When supply chains break or become more expensive, Company profits shrink, consumers pay more, demand slows, and economic growth suffers. It's economics 101 and it's playing out in real time. So here's why, despite all of that, I'm talking about an investment strategy today.
I know it feels bad, guys, but remember, we have always recovered from every single correction, bear market, recession, depression in U.S. history. And again, I totally get it. This is scary. But let's zoom out for a second. The market has weathered 19 crashes in the last 150 years. Some took months to recover. Others took years. The Great Depression, a 79% drop.
Chapter 4: What investment strategies are suggested during a market downturn?
The dot-com burst and the Great Recession combo, a 54% decline over 12 years. But even then, the market bounced back. It always does. Always. A couple of people asked me over the weekend how I stay calm when markets tank. And honestly, I'm not 100% calm. I'm not going to lie. But this, what I'm talking about right now is how I stay mostly calm. I remind myself that this has happened before.
Doesn't mean it doesn't suck because it totally does. But it does feel less scary when we remember that we've been through this before and we've come out the other side with bigger and badder portfolios and higher net worths. Market corrections, which is a drop of 10% or more, happen about once every two years. Bear markets, those are drops of 20% or more, happen about once a decade.
But every single time, the market has recovered. I'm repeating it so much because it is so important to remember. I've been working in this industry for decades now, and I have never, ever met a financial advisor or economist that recommends selling on a dip. We should be thinking about our stocks more like houses. People don't panic sell their homes if their Zestimate on Zillow goes down.
They stay. They wait. And prospective homebuyers don't freak out when home prices are low. They jump in and they buy. That's how we should be thinking about stocks too. From my perspective, a lot of high quality stocks are on sale. So I'm putting my blinders on and I am going to try to buy some more. Some hedge fund managers are making comments about how this is starting to feel like 2008.
Chapter 5: Why should investors remain positive despite market crashes?
And I lived through that. It was a really awful time for a lot of us. But some people actually made their fortunes by doing exactly this, buying on dips and If you had 100 grand in savings in 2008, but you were too freaked out by the market tanking, so you waited to invest all of that money until the stock market recovered in 2013 and then invested it, your 100K would be worth around 480K now.
But if you jumped into the market right at the worst time of the crash and invested your 100K, that investment would be worth over a million bucks now. Double what it would have been if you waited for the right time.
so that's why i don't panic sell and i actually buy on dips but here's where i wouldn't over correct we know that the market will recover we just don't know when after the stock market dropped 34 when covid broke out the market recovered in four months and then even just roughly a year later when the russia ukraine war broke out the market fell nearly 29 and recovery took 18 months
This does feel a little bit different to me, to be honest. Bank of America just upped their recession prediction from 40% to 60%, so the market could take a while to recover. I'm buying more because I'm a long-term investor, and some of this money I don't expect to need for 20 years, and I'm comfortable with the risk of things getting worse before they get better.
We don't know when things will get better, so we don't invest money that we will need soon. So what do you do if you're just getting started investing or feel paralyzed by what's happening right now, but still want to buy the dip? I'm going to share some simple, smart places to start. So here are four funds to research. And if you're new here, I love funds because they're a collection of stocks.
So if one stock is having a particularly bad day, I'm looking at you, Nike, the others can act somewhat as a buffer. Obviously, do your own research. Ticker symbol VOO. This is a low-cost S&P 500 index fund. It mirrors the S&P 500 index. So if you buy into VOO, you're buying a tiny piece of the U.S. 's 500 biggest companies like the Magnificent Seven Stocks,
Berkshire Hathaway, JP Morgan, Procter & Gamble, Johnson & Johnson, and on and on. When the market recovers, and it will, VOO will rise with it. There are other funds that mimic the market too, like SPY, but I like VOO because it has a lower fee than SPY. Ticker symbol DIA. This one tracks the Dow Jones Industrial Average, which includes big established players like Apple and Boeing.
It's less tech-heavy, more old-school, but a steady bet. Ticker symbol QQQ. This tracks the Nasdaq 100, which has big tech companies like Microsoft and Nvidia. It's riskier, but if you believe in the long-term power of innovation and tech, QQQ could be a good addition.
But if you do invest in this, just be aware that a lot of big stocks in QQQ are also in VOO, like all of the Magnificent Seven stocks, for example. So be mindful of not doing too much doubling up or that misses the whole point of diversification. Ticker symbol GLD. This is a gold ETF. It's not going to skyrocket like tech stocks, but gold tends to hold its value when the market freaks out.
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