From Yahoo Finance: 2025-06-06 03:15:00

The S&P 500 plunged after President Trump announced “Liberation Day” tariffs, but it has since made a remarkable recovery. History suggests these tariffs could lead to a recession, with past downturns causing an average 31% decline. Investors who stay put during market drops may miss out on rebounds.

Trump’s trade policy changes have caused market turmoil, with tariffs on China, Canada, and Mexico, driving stock losses. The recent “Liberation Day” tariffs wiped out $6 trillion from the market. Despite this, the S&P 500 has rebounded, thanks in part to Trump softening his stance on trade policies.

Current tariffs are at their highest level since 1937, potentially leading to a recession. The U.S. faced multiple recessions in the early 20th century, with tariffs being a major factor. If Trump’s tariffs persist, a recession is likely, historically coinciding with stock market crashes and significant S&P 500 declines.

Trump’s tariffs could cause a recession, with an average 32% drop in the S&P 500 during past economic downturns. Market timing strategies often fail, as the best and worst days are closely linked. Selling stocks due to fear of a crash may not be wise, as missing out on the best days can lead to underperformance.

Despite the threat of a market crash, investors should not avoid good stocks. Taking profits in overvalued stocks and holding cash for buying opportunities during corrections is prudent. Investing in high-conviction, growth-oriented companies at reasonable valuations can help weather market storms.

Consider the potential impact of Trump’s tariffs on the economy and the stock market, but don’t let fear dictate investment decisions. History shows that staying invested is crucial, even during uncertain times. Don’t miss out on opportunities by trying to time the market, and focus on quality investments for the long term.

Read more: Will the Stock Market Crash as Tariffs Hit the Economy in 2025? History Offers an Important Clue.