April 2025, From the Field
The Trump administration’s seismic policy shifts and the sharp swings in the market, coupled with declining economic indicators and rising geopolitical tensions, sent me down memory lane for useful lessons from some of the most challenging times of my career.
This remembrance of crises past included the 1990s recession, the Asian financial crisis in 1997, the collapse of Long‑Term Capital Management, the 2008–2009 global financial crisis, the 2011–2012 European sovereign debt crisis, and the shutdown of broad swathes of the global economy during the coronavirus pandemic. What can investors learn from these extraordinarily difficult market environments to help them navigate periods of heightened volatility and economic stress?
Here are five suggestions to help you survive the market’s gyrations and thrive afterward. The key is to stay calm and focused on the long term.
It is natural to look at your entire portfolio at once and think that getting market direction right is the only thing that matters and that fundamental security analysis is pointless. This is incorrect. A deep understanding of companies can give investors the confidence to buy in the scariest markets. These moves should ultimately be rewarded when conditions improve. Use a longer‑than‑average lens to view the world in front of you, and stay focused on what matters.
"Use a longer-than- average lens to view the world in front of you...."
When volatility becomes extreme, markets become disorderly. Avoid wholesale portfolio changes as I’d say your chances of getting it right are around 50% minus trading costs, which, incidentally, will be elevated. Conversely, extreme dislocation at security level pricing provides opportunity, assuming you have done your homework.
You cannot pick the exact bottom, so why beat yourself up about it? It is easy to start the day with optimism only to look foolish by midafternoon. Nobody, no matter what they claim, has the power of precognition—so avoid becoming obsessed with it. Being approximately right is better than being precisely wrong. Averaging in is a valid strategy.
Keep embracing risk and remain invested and diversified. When reversals occur, they are often powerful. Much of the potential upside tends to come in a limited number of trading sessions, making it difficult to reinvest in time. In all the bear market cycles since the 1990s, the inflection point only became apparent with the passage of time. No bell is ever rung to signify the bottom.
Do not get anchored to the prices from which stocks have fallen. You cannot trade at yesterday’s prices. In security selection, we are always making a relative bet. We therefore need to understand how the relative earnings power of companies has changed and, where appropriate, sell low to buy low. In behavioral terms, this is a hard thing to do.
Bear markets tend to bucket into three types: event-driven, cyclical and structural—in descending order of duration. The diagnosis here would appear to be event‑driven turning into a cyclical issue with a prognosis of medium-term duration as the market comes to terms with what tariffs mean for earnings and inflation.
The extremely aggressive tariffs that the Trump administration unveiled on what the president dubbed “Liberation Day” were a shock to the global economy and, potentially, the world order.
It was a seminal moment.
Even with President Trump announcing a 90-day pause on so-called reciprocal tariffs for much of the world, the remaining 10% across-the-board levy is still a significant increase relative to what was in place at the start of the year. And that says nothing of the escalating trade war between the U.S. and China or President Trump’s threatened tariffs on copper, lumber, pharmaceuticals, and semiconductors.
From my vantage point, extreme tail events—for example, a complete withdrawal of tariffs or the economic Armageddon that could follow a total decoupling of China and the U.S.—appear unlikely. However, the middle path, which is likely to be paved with permanently higher tariffs and further trade negotiations, is still winding, and visibility is hazy.
Economic orthodoxy would tell you that tariffs are likely to be inflationary and that the hit to demand would cause meaningful damage to the U.S. economy and around the world. That said, there is very little about policymaking now that is orthodox.
If we enter a recession, the tactical response of favoring defensive sectors, such as utilities, health care, and consumer staples, likely still holds from the old playbook. But we also need to be strategic and factor in potential structural changes. Europe, for example, appears to be heeding its wake-up call and is increasing defense spending, opening the door to fiscal stimulus, and operating more as a unified market.
"Now, more than ever, investors must be calm and rational."
Now, more than ever, investors must be calm and rational. We need to remain detached from all the noise on social media and be among the seemingly small percentage of market participants who remain calm, confident, energized, focused, knowledgeable, and anticipatory.
Truly great companies are rare. A 2016 study by Hendrik Bessembinder at Arizona State University, for example, found that from 1926 through 2015, just 86 stocks out of 26,000 examined accounted for 50% of the market’s return. The top 1,000 companies (less than 4% of the total) accounted for 100% of the wealth creation during that time.
Chances to buy great companies at great prices are even rarer—so we believe in taking a shot when the opportunity arises.
Justin Thomson is head of the Investment Institute and chief investment officer. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.
Important Information
This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a guarantee or a reliable indicator of future results. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass.
The views contained herein are as of April 15, 2025 and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request. It is not intended for distribution to retail investors in any jurisdiction.
Australia—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. For Wholesale Clients only.
Canada—Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to non‑individual Accredited Investors and non-individual Permitted Clients as defined under National Instrument 45-106 and National Instrument 31-103, respectively. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.
EEA—Unless indicated otherwise this material is issued and approved by T. Rowe Price (Luxembourg) Management S.à r.l. 35 Boulevard du Prince Henri L-1724 Luxembourg which is authorised and regulated by the Luxembourg Commission de Surveillance du Secteur Financier. For Professional Clients only.
New Zealand—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. No Interests are offered to the public. Accordingly, the Interests may not, directly or indirectly, be offered, sold or delivered in New Zealand, nor may any offering document or advertisement in relation to any offer of the Interests be distributed in New Zealand, other than in circumstances where there is no contravention of the Financial Markets Conduct Act 2013.
Switzerland—Issued in Switzerland by T. Rowe Price (Switzerland) GmbH, Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only.
UK—This material is issued and approved by T. Rowe Price International Ltd, Warwick Court, 5 Paternoster Square, London EC4M 7DX which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.
USA—Issued in the USA by T. Rowe Price Associates, Inc., 1307 Point Street, Baltimore, MD 21231, which is regulated by the U.S. Securities and Exchange Commission. For Institutional Investors only.
© 2025 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, the Bighorn Sheep design, and related indicators (troweprice.com/en/intellectual-property) are trademarks of T. Rowe Price Group, Inc. All other trademarks are the property of their respective owners.