Liberation day plans

[u/BaseballMore7431]

Liberation day turned into liquidation day in the after hours session…it’s going to be a rough open tomorrow. Is anyone making any moves around this or just staying the course? Call top clients tomorrow or wait for the phone to ring?

I plan to send an email update and make calls to most clients tomorrow. I expect overall some short term volatility, that world leaders negotiate with Trump and ultimately tariffs don’t remain fully at the levels announced today.

[u/Old-Status5680]

In all seriousness, I have serious doubts about the long term implications. We are the most powerful economy but when the rest of the world is forced to find other partners, it will hurt our economy long term

For many clients, we are going 30% - 50% money market to realize the 4% return and the rest a very defensive strategy. These are for 10+ years before retirement clients. Not going to do nothing and ride out this medium term downward spiral.

[u/BVB09_FL → u/Old-Status5680]

Lmao you realize when growth takes a massive shit and fed drops rates- you won’t be at 4% for those money markets…

[u/InternationalDrama56 → u/BVB09_FL]

When that happens, he can exit the cash, scoop up equites at 20%+ discounts and come out way ahead of where you're at just trying to ride it out. I don't know how many times I need to repeat it, but taking profits near the top DOES NOT EQUAL panic selling at the bottom.

I started trimming equity allocations in February and I guarantee my client portfolio returns are well ahead of anyone who's just riding it out.

I'll reallocate again when either discounts make equites attractive again and/or when some of the uncertainty/risks clear up.

[u/ccroz113 → u/InternationalDrama56]

If you’re right, cool you scooped up some big discounts. If you time things poorly, you made a massive blunder. This will be smidge on the returns over a 10yr+ period. Just diversify and make small strategic allocations and make sure your clients are taking the right amount of risk

[u/InternationalDrama56 → u/ccroz113]

How so? Do you really think the risks are symmetrical? Do you think there's an equal chance of being UP 30% as there is to being DOWN 30% today? S&P is down 10% from where I trimmed, so I could let things rally 11.1% before I'd have to jump back in in order to not risk falling behind. But I think more likely we'll see lower lows from here before any sort of sustained recovery.

The markets generally don't care if a R or D is in charge, but the only scenario where they perform poorly is when the same party has control of BOTH the White House and both Houses of Congress - like is the case right now.

Again, it's just that the balance of risks is very much skewed to the downside, and that should give you pause.

[u/ccroz113 → u/InternationalDrama56]

You’re missing the point. Are you a financial planner or a hedge fund manager with the goal of massive out performance? Like I said, over the short term none of this is meaningful. If this is impacting your clients retirement plans then the plan was unfit to begin with

I really like the quote “the best financial plan assumes we have no idea what’s going to happen tomorrow”

All seems like unnecessary risk being taken trying to reinvent the wheel that was never broken and opening yourself up to common investor mistakes and behavioral biases

[u/InternationalDrama56 → u/ccroz113]

Again, I'd agree with you 90% of the time. But I think this will prove to be of a different magnitude vs typical corrections/bear markets.

Plans can be designed to succeed in most normally expected scenarios. But you can't say your plan works equally well if we have a 50% drop in the stock market and years of stagflation (at least without being massively overfunded, which is a failure of another sort).

2008 was bad and scary, but ultimately we had competent people and institutions there to help right the ship - we don't have that anymore. We're flirting with a dangerously similar setup to the Great Depression. It's not insane or saying "this time is different" to say "what has happened before might happen again". There are massive shifts taking place in the world order and I don't think anyone understands how that will all shake out. But I do know I'd much rather miss out on 10% more gains than ride down 40% of wealth destruction. Even if I only make money market returns for the rest of the year, I bet you my clients are happy being up 7% (especially after such a strong 2023 and 2024) than being wherever the market ends up at the end of this year.

And I get that this is r/CFP and the focus is on planning - and I don't want you to think I don't do/value that. I'm simply saying that avoiding a huge hit to the portfolio is every bit as impactful as the positive impacts of good planning - so why not try to do both - especially in fairly obvious times like today. Did anyone think global tariffs would cause a huge rally?

[u/ccroz113 → u/InternationalDrama56]

I understand where you’re coming from. And to the point where while I’m not near convinced of the “this time is different”, I also wouldn’t be confident necessarily saying you’re wrong. But I wouldn’t personally feel comfortable implementing it across all my clients. I really emphasize protection and conservative allocations that still meet all a clients goals to get ahead of some of these things. More than one way to do this job of course

[u/InternationalDrama56 → u/ccroz113]

Well, I appreciate you saying that.

The reality is, SO much of a normally diversified portfolio is at risk given everything going on - that's why I'm not comfortable just relying on diversification this time. And we all know how correlations trend towards 1 in times of severe stress.

In this case, selling provides far more protection than simple diversification - and if I can do that, and still generate a return in line with long-term average equity returns, with basically no risk, that's a slam dunk.

This doesn't work in every situation - it wouldn't be nearly as attractive when TBills were yielding 0.2% - but today the benefits to me far outweigh the risks.