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You should allow enough time for your investment strategy to succeed. Assuming your original investment thesis is sound, the longer you stay patient and avoid reacting impulsively to market news, the better your performance may be over time.

However, it’s important to distinguish between patience and pride. Sometimes, it’s necessary to recognize when a mistake has been made and to cut your losses. We are all subject to behavioral biases, which can be difficult to control.

One of the most common is loss aversion—the tendency to feel the pain of a loss more strongly than the pleasure of an equivalent gain. As Kahneman and Tversky (1984) noted, “a loss of $X is more aversive than a gain of $X is attractive.” This often leads investors to sell during downturns in an attempt to limit losses, even if it’s not the most rational choice.

Another bias, the representativeness heuristic, explains how investors often base their predictions on recent news or vivid descriptions rather than on their own beliefs or solid fundamental analysis. For example, watching financial media like CNBC or Bloomberg might lead investors to make decisions based on incomplete or sensationalized information.

Be patient with your investment decisions. Take your time, do your own research, and make choices based on careful analysis—not short-term noise.

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Investors should keep cash savings in their bank accounts for rainy days. Cash reserves can serve as a hedge against unexpected future expenses (Ivan Sichkar, 2012). This is a prudent risk management strategy that may also enhance overall investment returns.

The need for unexpected cash often rises during economic downturns, when the risk of job loss and prolonged unemployment is higher. Without sufficient cash savings, investors may be forced to withdraw money from their investment portfolios – often at the worst possible time.

An economic downturn is one of the least favorable times to sell securities, as prices tend to be depressed. Selling during a market decline prevents investors from benefiting from the eventual recovery. In contrast, smart cash management provides a financial cushion, helping investors weather tough times without having to liquidate long-term investments.

Instead of relying solely on their investment portfolios, investors should aim to keep at least six months’ worth of living expenses saved in cash. Today, there are attractive cash alternatives available—such as the iShares 0–3 Month Treasury Bond ETF (SHV), which had a yield to maturity of 4.3% as of April 14, 2025. This is a very conservative investment option that may be suitable for holding your six-month cash reserve. Of course, yields can change over time, and you should evaluate other available options before deciding where to keep your emergency savings.

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Selecting the right type of investment account may improve your after-tax investment returns. Most of the time, you will need to choose between taxable, tax-exempt, or tax-deferred account types. In many cases, it may be beneficial to have both taxable and non-taxable accounts.

What are the benefits of taxable and non-taxable accounts? Below is a brief description of a few available options. To better understand what’s best for your situation, consult your financial advisor.

A taxable account can be an individual or joint account. With a taxable account, you share the tax impact with the IRS. Capital gains and income are your tax liability – IRS gains. On the other hand, capital losses are your tax deductions – IRS losses. It may be prudent to hold growth stocks that don’t pay dividends in a taxable account. When you realize capital losses, you may be able to deduct them on your tax return.

Another benefit of taxable accounts is flexibility. There are no penalties for early withdrawals and no limits on deposits. Taxable accounts offer the most flexibility but tend to be less tax-efficient. All contributions are made with after-tax dollars, and you may be required to pay tax on realized capital gains and income each year.

Tax-advantaged accounts include 401(k) retirement plans, Traditional IRA, and Roth IRA accounts. These accounts are more tax-efficient and can potentially improve your long-term investment returns. However, they come with more restrictions.

If you work for a company that offers a 401(k) retirement plan, you have access to a tax-deferred account. A 401(k) allows your investments to grow tax-deferred, meaning you won’t pay taxes on capital gains or income while the money remains in the account. You can also contribute more to a 401(k) than to an Individual Retirement Account (IRA). All contributions are made pre-tax.

In 2025, you were allowed to contribute up to $23,500 to a 401(k). If you are age 50 or older, you could make an additional $7,500 catch-up contribution. Some employers offer a 401(k) match, where the employer matches your contributions based on a specific formula. This is essentially free money – an extra bonus for participating in the plan. To take full advantage, consider contributing at least enough to receive the full match so you’re not leaving money on the table. Keep in mind that 401(k) plans are designed for retirement, so early withdrawals may be subject to penalties and restrictions.

Individual Retirement Accounts (IRA) – Traditional and Roth are also tax-advantaged. If your tax rate doesn’t change over time, both Traditional and Roth IRAs can provide similar tax benefits.

With a Traditional IRA, contributions may be tax-deductible if your income is below IRS limits. Taxes are paid when you take distributions. In contrast, Roth IRA contributions are made with after-tax dollars, but qualified distributions are tax-free. All capital gains and income are non-taxable within both account types.

In 2025, you could contribute up to $7,000 or $8,000 if age 50 or older, to a Traditional IRA, Roth IRA, or a combination of both. The total combined contribution cannot exceed the applicable maximum. If you withdraw money from your IRA early, you may be subject to early withdrawal penalties.

Having both a taxable account and a tax-advantaged account is a smart strategy for beginner investors. A taxable account gives you maximum flexibility, while tax-advantaged accounts allow your money to grow more efficiently by reducing taxes—helping each dollar work harder for you and boosting long-term returns.

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Before, investing was primarily accessible to wealthy individuals. As a result, the stock market became heavily concentrated in the hands of the rich, allowing their wealth to grow steadily over time and widening the inequality gap. Today, the disparity is striking. The wealthiest 1% of Americans own as much of the stock market as the bottom 50% of U.S. households, according to the Board of Governors of the Federal Reserve System. As of the fourth quarter of 2024, the top 1% of U.S. households held approximately 31% of the nation’s total household wealth, while the bottom 50% collectively owned just 2.5% (see Chart 1). Accessible investing can play a vital role in narrowing this gap. It offers individuals of all income levels the opportunity to build wealth and work toward a better quality of life.

Fortunately, recent innovations in the financial industry have opened the door for more people to participate in financial markets. Today, there’s no required minimum balance to open a brokerage account. With as little as $100, anyone can start investing – a welcome shift from the past, when only the wealthy could take advantage of stock market growth. One of the most significant developments has been the introduction of commission-free trading for U.S. stocks, ETFs, and options. This has been a game-changer for beginner investors and investors with small account balances. In 2015, Robinhood pioneered zero-commission trading. By 2019, Charles Schwab followed suit, and soon after, most major brokerage firms eliminated trading fees. Today, you can open an account with firms like Fidelity, Charles Schwab, or Robinhood and trade without paying commission costs.

For investors with limited capital, zero-commission trading is especially important. In the past, brokerage firms charged significant fees – $4.95 per trade at Charles Schwab and $9.95 per trade at TD Ameritrade. These fees significantly dragged down investment returns. For example, if you had $1,000 to invest and wanted to buy ten different securities, paying $9.95 per trade would cost you $95.50 to buy and another $95.50 to sell—totaling $191 in trading fees. You would need to earn back 24% just to break even to get to $1000. In the pre-zero-commission era, small investors couldn’t afford to trade individual securities without falling behind in performance. They were at a clear disadvantage. But now, everything has changed. Today, thanks to zero-commission platforms, investors of all sizes have the opportunity to participate in the stock market on more equal footing.

References
Board of Governors of the Federal Reserve System (US), Share of Corporate Equities and Mutual Fund Shares Held by the Top 1% (99th to 100th Wealth Percentiles) [WFRBST01122], retrieved from FRED, Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/WFRBST01122

Board of Governors of the Federal Reserve System (US), Distribution of Household Wealth in the U.S. since 1989: https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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When you invest today, you may earn a reward you can enjoy in the future. It’s prudent to balance tomorrow’s rewards with today’s pleasures. Spend a portion of your monthly budget on enjoyment now, but also make sure to save and invest for the future. Maintaining a healthy balance is key. After all, it’s important to enjoy life today—just in case tomorrow never comes. And if we do live a long life, it’s comforting to know we didn’t spend everything we earned or borrow against our future – so we won’t have to work extra later to make up for it.

In contrast, when you use a credit card to gain enjoyment today, you are borrowing against your future time. You will have to work more hours to pay off your credit card balance and will have less free time later. Instead of borrowing against your future time, start investing in yourself. You’ll feel better each month knowing that you are building toward a future with more free time and a better quality of life. Invest in yourself – starting today.

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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For the week of April 7–11, 2025, equity markets posted a strong rebound across several regions and sectors (Table 1). Some of the best-performing indices included:

Equities recovered some of their steep recent losses, delivering solid performance for the week despite ongoing volatility and uncertainty.

On the other hand, some asset classes saw noticeable declines:

Rising interest rates, spurred by inflation concerns and potential imbalances in supply and demand of the US Treasuries, weighed heavily on fixed-income markets. There is also speculation that large holders of U.S. debt, such as China, may consider reducing their Treasury holdings, adding upward pressure on yields and driving prices lower.

One possible response by China to the imposed tariffs on their goods could involve selling a portion of its U.S. Treasury holdings. Currently, China holds approximately $760 billion in U.S. Treasuries (according to the Department of the Treasury). If China were to reduce its position, it could further drive yields higher. Such a move might prompt President Donald Trump to pause the collection of tariffs and potentially reopen trade negotiations between the two nations.

Of course, this remains speculative at this time.

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

References:

China Holdings of US Treasury Securities. CEIC Data. https://www.ceicdata.com/en/china/holdings-of-us-treasury-securities/holdings-of-us-treasury-securities

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Stagflation is an economic condition that occurs when three factors are present:

The Atlanta Fed’s GDPNow forecast model estimates annual GDP growth of -2.4% as of April 9, 2025. Today’s University of Michigan Consumer Sentiment Index came in at 50.8, compared to 77.2 a year ago—a decline of 34%. This drop reflects growing pessimism among consumers. When people worry about the future, they tend to spend less, prompting companies to cut costs, further slowing the economy.

Inflation expectations have also increased. According to the University of Michigan, inflation expectations rose from 5% to 6.7% over the past 30 days — the highest level since 1981. Tariffs on goods are often passed on to consumers in the form of higher prices.

Additionally, 67% of people now expect unemployment to rise – the highest level of pessimism on record since 2009 (University of Michigan, April 11, 2025).

Given these indicators, one could argue that the risk of stagflation is quite high. So, what should investors consider in such an environment?

How to Invest During Stagflation

Your main goal as an investor during stagflation is to earn returns that at least keep up with rising prices.

Cash and Safe Income

If you’re holding cash for a rainy day, you might consider short-term U.S. Treasuries. The ETF ticker SHV currently yields 4.3% with minimal risk. It invests in U.S. government debt maturing within the next three months. This minimizes interest rate risk, but you are exposed to reinvestment risk – meaning the 4.3% return is not guaranteed if the Fed begins cutting rates.

The Fed’s Dilemma

Stagflation creates a challenge for the Federal Reserve, as it puts its dual mandate at odds:

In stagflation, the Fed faces a balancing act, navigating between inflation control and economic support.

Rising inflation, slowing growth, and increasing unemployment suggest stagflation may no longer be a distant risk. While the path forward is uncertain, investors can take practical steps to protect their portfolios by focusing on essential sectors, inflation hedges like gold, and safe, short-term income options. Staying diversified and informed will be key in navigating the challenges ahead.

References

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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Inflation is moderating, and prices are starting to come down. On April 10th, 2025 the U.S. Bureau of Labor Statistics announced that the Consumer Price Index (CPI) for all items rose 2.4% over the last 12 months before seasonal adjustments. For comparison, the CPI in February 2025 was up 2.8% over the prior 12 months. This 2.4% figure is getting close to the Federal Reserve’s target inflation rate of 2%. That’s good news for consumers, assuming we set aside all other trade-related and economic factors.

Although CPI gets a lot of attention, the Fed’s preferred inflation measure is the Personal Consumption Expenditures (PCE) Price Index. So, we will wait and see how the PCE numbers look when they are released later this month.
The Federal Reserve’s dual mandate is to promote maximum employment and stable prices. If inflation continues trending toward the 2% target, the Fed may have more room to focus on supporting jobs and potentially stimulate the economy if needed. While not the Fed’s go-to measure, the CPI still gives us a helpful snapshot, and it’s currently signaling that price pressures may be easing.

One of the biggest declines was in energy costs. Energy commodities dropped 6% in March alone and are down 9.5% for the year. Gasoline prices are down 9.8% year-over-year (see Chart 1). The energy market is driven by supply and demand: prices tend to fall when supply increases faster than demand. During periods of slower economic activity, energy demand typically drops, which can push prices lower. The recent decline in energy prices may reflect a broader economic slowdown.

Housing costs are also showing signs of cooling. Shelter prices rose just 0.2% in March 2025, compared to 0.3% in February and 0.4% in January (see Chart 2). Elevated home prices and high interest rates are keeping homes unaffordable. Meanwhile, food prices remain volatile and are up 3% year-over-year.

Overall the total inflation is moving in the right direction, and that is encouraging for consumers. But if this trend is driven by weakening economic activity, we could be looking at a more complex situation ahead.

References:
U.S. Bureau of Labor Statistics. Consumer Price Index Summary released on April 10, 20205. https://www.bls.gov/news.release/cpi.nr0.htm#cpi_pressa.f.1

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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Today, U.S. President Donald Trump decided to play nice with many, except China. China is the bad guy today. One possible reason is that it’s hard to label everyone a bad guy; if you do, no one will want to be your friend.

The stock market had an amazing performance today. Markets seem to signal that clarity and predictability are good. It’s better to rely on negotiations, diplomacy, and free trade than on protectionism.

The best-performing category was the technology-heavy NASDAQ-100 index, which jumped 12% (see Chart 1). Other indexes also performed very well: Global Equities, Developed Markets, and U.S. Equities were up 9% for the day (see Chart 1). That’s the kind of performance investors usually hope to achieve during an entire year—yet it happened in just a few hours after the U.S. President announced a 90-day pause on tariff implementation.

This highlights how unpredictable and volatile the stock market can be. On one hand, clarity is welcome. On the other hand, everything can shift in unexpected ways at any moment. What’s different this time is that the change lies outside the control of companies or consumers. Markets do not like unpredictability.

Disclosures:
The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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Stock markets have long served as an effective weighting mechanism that measures the current and near-future health of the economy and businesses. Even US President Donald Trump has referenced market performance as a measure of his policies’ effect on economic success. It makes sense: trillions of trades occur daily across the globe, with investors analyzing real-time data to make buy, sell, or hold decisions. Collectively, these decisions act as a form of grading for the economy, offering a live assessment of market sentiment.

Lately, however, it’s been increasingly ironic to watch government officials who advocate for smaller government and increased efficiency simultaneously push for far-reaching economic interventions. These actions go against the principles found in most economics’ textbooks, which generally argue that the best kind of government is one that limits its involvement in the economy. The government’s role is typically to provide essential services that are difficult or unprofitable for the private sector – such as national security, education, and infrastructure—not to micromanage economic outcomes.

In practice, though, we are seeing a disconnect. While today’s administration often talks about empowering the economy, its actions suggest a different agenda. The market has taken notice and is reacting accordingly. The US President Donald Trump even acknowledged the situation by stating, “Sometimes you have to take medicine to fix something,” signaling that he’s accepted a poor market response as a necessary side effect of current policy choices. In other words, he’s no longer trying to “pass the class” or be proud of the market’s grade, which is a troubling signal for investors.

When fiscal policies aim to reshape the global economic structure rather than build on the strengths of free-market systems, it results in uncertainty. And markets, by their nature, dislike unpredictability. That uncertainty is reflected now, especially in the stock market performance this year. Considering different sectors and indexes as school subjects, it becomes clear which ones are failing. The Russell 2000, an index representing smaller U.S. companies that earn around 80% of their revenue domestically, is currently the worst performer, down 21% year-to-date (see Chart 1). This is particularly notable because these companies are the most exposed to domestic policy and should, in theory, benefit the most from a “pro-business” administration. Instead, the market appears more concerned about U.S. businesses than ever.

The next-worst performer is the technology-heavy NASDAQ-100, down 18% year-to-date. Historically, technology has been a stronghold for the U.S. and a key competitive advantage. However, with growing government involvement, investor confidence seems to be slipping even in this high-growth sector. The broader U.S. stock market has not fared much better, down 16% for the year so far.

In contrast, international markets are holding up relatively well. China, as tracked by the MSCI China ETF, is down just 2%. European markets are flat, and Latin America is slightly up for the year, making it the best-performing region globally. These results underscore a key point: markets tend to perform better under systems they understand and can value, which is usually one with minimal government interference. When governments begin to change the rules or introduce broad, structural changes, markets struggle to forecast outcomes.

Fiscal policies often have long-term effects, and the full impact of today’s decisions may not be felt for years. That’s both the promise and the risk. While some changes may eventually yield positive results, the short-term effect is one of uncertainty, which is already weighing heavily on market performance.

Ultimately, markets are more than just price movements—they reflect investor confidence and faith in the broader system. Right now, that confidence is being tested, and there is no clear vision of what the new economic system will be and how it should be re-evaluated. The stock market is issuing grades in real-time, and so far, the results suggest a lack of faith in the current direction. Investors will need more clarity to give an accurate grade, and the grading is not over yet.

Disclosures:

The analysis is based on historical data and future expectations that may not be correct. This paper was written as an opinion only. The data is not guaranteed to be accurate or complete. Please consult with your financial advisor before making an investment decision. Neither ECNFIN.COM nor its author is responsible for any damages or losses arising from any use of this information. Past performance doesn’t guarantee future results.

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