Market Downturn Explained and Bear Market Investment Strategies

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3:16All right, guys, how are we all doing? Are we a little stressed? A little anxious? It is completely normal to be freaked out when the stock market has such a bad day. I mean, it's not just a bad day. It's the worst day in five years. The S &P 500 fell 9.1 % last week with a 6 % drop on Friday alone, making a 6 % total drop since an all-time high on February 19th and$2.5 trillion lost in the market. So that's a lot. We know that the stock market goes up and down, but that kind of fall in such a short timeframe is pretty rare. We've only seen a few like it in the last century. So today, I want to go beyond the headlines to talk about why this happened, what will happen next, and share an easy investment strategy.

4:01You might think that that kind of pot agenda sounds really weird. If the stock market is down, why the heck are we talking about investing strategies? I'll explain that to you. But first, let's talk about why the heck this is happening. 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 % tariff is now in place for nearly every country, and dozens are facing even steeper rates. China, for example, got hit with another 34 % tariff on top of a 20 % tariff already in place, bringing their grand total to 54%.

4:40These 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 % 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.

5:19Stocks 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.

5:54With 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. 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.

6:32It can try to renegotiate the cost with the Chinese manufacturer and pay less per backpack, or it could eat the$1 ,350 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.

7:11I 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. 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.

7:53But 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. Their 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.

8:30I'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.

9:09And 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. 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.

9:43So that's why I don't panic sell and I actually buy on dips. But here's where I wouldn't overcorrect. 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 percent 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 percent to 60 percent, 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.

10:26We 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.

11:00It 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, J.P. 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.

11:41This 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 7 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. So think of it like a financial seatbelt.

12:17Now, there is no foolproof fund, but spreading your money out across a mix like this, stocks for growth, bonds and gold for stability, is a great first step toward building a resilient portfolio. For today's tip, you can take straight to the bank. So I know today I've been sharing mostly bad news with higher prices and lower returns in the market, but here's a bright spot. Not all industries will be affected by tariffs. There are some industries that are expected to be pretty stable in terms of prices, namely consumer staples, utilities and health care, which are less reliant on international trade.

12:49So good news for consumers in those industries and for investors, those industries will weather slightly better in this market, too.

13:02Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.