Really? How much did “the market” lose, really? Economics news writers, who really should know better, claim

The stock market went off a cliff last week after President Trump announced the highest tariffs in more than a century, vaporizing more than $6 trillion of wealth in two days.

No, $6 trillion in wealth was not vaporized, not even lost. These are purely paper losses, not real losses, and the only ones who were hurt financially by the decline in monopoly money value are those who bought stocks on margin—borrowed money from their brokers to buy stock shares. Those folks are subject to margin calls and must reimburse their brokers with real dollars, or with remaining stock shares which the broker will sell for real money, even at the currently depressed rates.

No one has lost real money in the precipitous drop unless they sold shares for actual money in the throes of last week’s hard drop. These are, to be sure, emotionally trying times, and real losses can still occur, but so far only for those who use their stock shares as collateral for this or that purpose.

Later on, were the economy to start behaving in the same way as the market and itself start to stutter, real losses can occur, but from the market’s perspective, the losses will be from “forced” sale of some fraction of an individual’s remaining stock shares at depressed prices in order to raise real cash with which to make good on real obligations like rent/mortgage, food, energy, and so on.

In that regard, it’s important to keep in mind that the market leads, predicts the future of, the real economy—where real gains and losses of real, spendable money occur—by highly variable amounts ranging from a few months to lots of months into a couple of years, and occasionally the market is plain wrong. The latest example of this occurred early in ex-President Joe Biden’s (D) term when the market priced in a coming recession. That recession never occurred.

Today’s underlying economy remains strong, albeit the figures are prior to the new tariff regime, which won’t be fully laid on for another week or two. The economics news writers do recognize this much.

Whether the real economy will follow is impossible to know. But the risks are tilting in that direction.

The risks are real, but the economy so far has this:

The available evidence suggests US economic fundamentals remained strong through March. Job growth accelerated, with nonfarm payrolls rising 228,000, unemployment low at 4.2%, wages rising at a healthy clip, and layoffs rare.

Couple things on that. It’s private—real—economy layoffs that are rare. Layoffs from Federal government employment are rising, as are the numbers of those employees who are accepting the enormously generous buyout/severance packages in return for their resignations. But reducing the physical size of the Federal government is on the whole good for our economy.

The other is that the tariffs may well lead to restructuring of our economy with associated job losses and alternative job creations, but those effects will take months to begin to have effect and more months to work through.

What’s happening currently is the development of a buying opportunity, and a recession only broadens that buying opportunity. The economics news writers cited a JPMorgan research piece titled There Will Be Blood which raised JPMorgan’s assessment of a global recession to 60%. That’s simply a repeat of Baron Nathan Rothschild’s advice to buy when there’s blood in the streets, even if the blood is your own.

Or the disruption might cause permanent losses. That’s the real risk, not a risk of a recession, which is a fact of free market economies.

Free market economies have long periods of prosperity and boom interspersed with recessions which do not fully undo the prosperity, so the economy trends upward over the longer run. The alternative of a government directed economy, though, is permanent recession relative to free markets.

In the end, tariffs don’t undermine free market economies so much as they undermine a globalized “free market” by segmenting the globe back into national (or regional) markets. Whether that’s a good or bad outcome is for a separate discussion.

This is one such. The headline and subhead say it:

The Days of Set-and-Forget Investing Just Ended for Many Americans
President Trump’s economic policies are sending investors out of US stocks and into cash, bonds, gold and European defense stocks

The newswriters illustrate their claim with this anecdote:

For years, Yoram Ariely hadn’t touched most of his investments, preferring to ride the stock market’s ups and downs. Last Tuesday, he decided he had enough.
The 82-year-old unloaded almost half of his stock investments, fearful of the effects of President Trump’s economic agenda, and tariffs in particular. He may get rid of more still.
“The decisions are changing daily,” said Ariely, a retired business owner in Longboat Key, FL.

Therein lies the problem with this sort of reaction. Buy and hold—set and forget in newswriters’ lexicon—has always been a fine, if not flashy, way to build wealth when it’s done from a young age and continued through retirement/geezerdom. That includes riding through the ups and downs, including corrections and bear markets. Some investors, who change the stocks (and/or bonds, real estate, gold and silver with their reputation as inflation hedges, etc) occasionally (over weeks to months), will do better and others worse than buy and holders. Some traders, who change their vehicles on a more frequent basis, down through daily trades, also will do better and others worse. Slow but steady produces, over the long term, steady and favorable results, if without the flash and the heady rush.

And that’s the key: over the long term, which takes lots of patience and an emotional willingness to ride through the inevitable downturns, corrections, and bear markets, even more to add to holdings during those down turns. Worries about the disruptions and dislocations associated with President Donald Trump’s (R) economic and political moves are overblown in the sense that these are just another of those inevitable disruptions. Buy and hold remains a viable, middle of the road wealth building technique.

On the other hand, buy and hold has never been the right path for those of an age—those retired geezers—for whom there’s little time left in their lives in which, and reduced steady income with which, to recover from a sharp or relatively deep (or deep) market downturn. For those folks, preserving the wealth, the capital, that they have accumulated becomes more important than continuing to try to increase their wealth. The latter entails more risk than is optimal for those with shortening remaining life spans and reduced regular income.

Trump’s moves are just another of the disruptions inevitable in an investing environment; they present no reason for anyone to change their investing style.