It's Not About Timing the Market—It's About Time in the Market

What Happened

On April 2, President Trump announced sweeping new tariffs as part of his proposed economic plan. This included a 10% baseline tariff on all imports and even steeper rates targeting China (34%), Japan (24%), and the European Union (20%). This 'Liberation Day' policy, as Trump described it, strives to reduce foreign reliance and restore domestic manufacturing dominance.

The markets responded with immediate panic. The S&P 500 tumbled 4.9%, the Nasdaq slid 6%, and the Dow dropped nearly 1,700 points in a single day. Mega-cap tech stocks like Nvidia and Apple took major hits, falling between 5% and 9%.

This sudden downturn in the market echoed prior market reactions to tariff threats and trade wars, particularly during the U.S.-China trade war back in 2018-2019. Even then, investors saw similar selloffs fueled by uncertainty, although the markets eventually recovered. Persistent investors who stuck to their guns ultimately saw positive returns.

This recent episode reinforces an old investing truth: markets are emotional in the short term but rational over the long run.

Why It Matters

Trade wars tend to stoke fear in investors because they introduce economic uncertainty. Tariffs often lead to higher costs for businesses and consumers, potential supply chain disruptions, and retaliatory policies from trading partners.

Analysts are already projecting that these new tariffs could cost the average U.S. household roughly $3,800 a year in increased prices. Goldman Sachs revised its short-term S&P 500 return expectations to -5% and upped its recession probability forecast to 35%.

During markets like this, many investors may feel the temptation to sell, believing they can 'wait out' the volatility and jump back in once things stabilize. However, history would suggest that this strategy often backfires.

According to a J.P. Morgan analysis, missing just the 10 best days in the market over a 20-year period can cut overall returns by more than half. And those 10 days often come right after periods of extreme volatility, when fear is highest and confidence is lowest.

Consider what happened in March 2020. The early days of the COVID-19 pandemic crashed markets globally. Many investors pulled out in panic.

However, those who stayed in saw record gains in the following months. The same happened after the 2008 financial crisis and the dot-com bubble. The pattern is clear: temporary losses feel painful, but they are often followed by recoveries that more than make up the difference.

How It Affects Readers

For investors, the ongoing tariff war and the uncertainty that comes along with it is a test. Selling now would lock in losses and subsequently risks missing a rebound. Timing the market requires two near-perfect decisions: knowing when to get out and when to get back in. Most people fail at both. Staying in the market, on the other hand, means you're there when the recovery comes — whether it's next quarter or next year.

That isn't to say that ignoring risk or pretending volatility doesn't matter is wise. It just means that having a long-term plan and sticking to it is of paramount importance. Investors who are properly diversified, invested according to their goals and timeline, and not overexposed to any single sector such as tech, which tends to get hit hard during tariff scares, can ride out these storms with confidence.

Tariffs may raise prices, slow growth, and disrupt the market, but they don’t change the core principle that compounding takes time. Investors who stay the course — who understand that time in the market is what builds wealth — are the ones who come out ahead. Panicking over headlines might feel right in the moment, but over time discipline beats reaction.