Written By: Daniel Gleich
Key Points
- Trade policy and tariff announcements in the U.S. and globally may result in continued market fluctuations.
- To help navigate the current economic terrain, consider focusing on your overall long-term strategy, having a diversified retirement portfolio, and conducting thorough due diligence.
- Madison Trust’s Self-Directed IRA Specialists are here to answer your questions about alternative investing and how you can potentially position your retirement portfolio for continued growth, even during economic fluctuations.
Recently, there has been much uncertainty in the U.S. economy. President Trump has recently implemented a series of tariffs aimed at addressing trade deficits and promoting domestic industries.
As of April 9, The Budget Lab at Yale estimates that consumers face an overall average effective tariff rate of 27%. This is the highest rate since 1903. The “reciprocal” tariff rate, announced April 2 and effective April 9, are currently suspended for 90 days. During that time, the 10% minimum tariff rate applies universally to all countries. Certain countries that the United States has larger trade deficits, like China, may have higher tariffs, though still under negotiation. These new trade policies will likely impact investors across a variety of industries.
Recent History of Market Fluctuations
Historically, market fluctuations are a natural occurrence. Many of us remember the Dot-Com Bubble Burst in 2000, the Great Recession in 2008-2009, and the impact of the Coronavirus Pandemic in 2020. While there is much uncertainty, historically long–term investors, like those saving for retirement, often benefit from sticking to their investment strategy, rather than trying to time entry and exit points.
Let’s explore the potential challenges present and possible strategies Self-Directed IRA (SDIRA) investors can do to help mitigate investment risks and provide a hedge against market volatility and geopolitical tensions.
Potential Challenges Tariffs Create for Self-Directed IRA Investors
Potential Inflation Pressure
Tariffs may lead to higher inflation across various sectors. This has the potential to weaken the purchasing power of your retirement savings.
Potential Increase in Costs on Imports
While investments in real estate or private businesses are generally considered stable, the tariffs could indirectly influence these markets. Costs to import materials can potentially slow down production and impact overall profit.
While tariffs may bring potential challenges to investors, it’s considered best practice to not make any rash investment decisions based on recent economic changes. Keeping a long-term investment approach and considering diversifying your portfolio beyond the stock market are key.
Potential Strategies for Self-Directed IRA Investors
Diversify, Diversify, Diversify
One of the main benefits of investing with a Self-Directed IRA is the almost endless alternative investment opportunities. This can potentially mitigate risks by not relying on a single sector’s reaction to tariffs and market fluctuations. Consider investing in a mix of real estate, private loans, precious metals, and more to create a diversified retirement portfolio.
Focusing on the Long-Term
Taking a long-term view helps you stay focused and avoid reacting impulsively to short-term market changes. Your Self-Directed IRA investments typically align with your long-term retirement goals. Therefore, it’s important not to make any abrupt changes to your carefully planned portfolio.
Conducting Due Diligence
It’s considered best practice to thoroughly research any potential investment. If you are looking to make a new investment, consider paying close attention to how tariffs might directly or indirectly affect its performance.
Considering the Increased Demand for Domestic Goods
Tariffs on imported goods could potentially lead to an increased demand for domestically produced alternatives. Consider how holding a stake in a U.S.-based company or industry can potentially benefit your investment portfolio.
Hedging Against Inflation with Precious Metals
Typically, precious metals and the stock market have an inverse relationship. If the value of the stock market decreases, the value of precious metals increases (and vice versa). Therefore, adding precious metals like gold and silver to your retirement portfolio can potentially provide insurance against inflation and economic uncertainty.
Staying Informed
Consider ways you can stay informed on current developments in trade policies and their potential economic effects. This may help you make informed investment decisions.
Reviewing and Rebalancing Your Retirement Portfolio as Needed
It’s considered best practice to regularly review your portfolio and rebalance as needed to maintain your desired asset allocation. This way, you can stay on track to reach your retirement goals.
Seeking Expert Advice
Consider consulting with a financial professional who understands market fluctuations, Self-Directed IRAs, and the potential impacts that tariffs have on various asset classes.
Conclusion: Let’s Tie It All Up
The current state of the economy presents a generally complex environment for all investors. While tariffs pose potential challenges, they also can create potential opportunities for Self-Directed IRA investors. Consider focusing on diversifying your retirement portfolio, conducting due diligence, and maintaining a long-term perspective. This may help you navigate the current economic terrain and potentially position your retirement portfolio for continued growth.
