Break glass in case of emergency: What to do after a market shock
Last week’s sell-off will go down in history.
In just two days, the S&P 500 dropped by nearly 10% and the Nasdaq fell more than 12%. It was a dramatic and sudden correction, reminiscent of Black Monday in 1987, the post-Lehman crash of 2008, and the market freefall triggered by the COVID-19 shutdowns in March 2020.
This time, the catalyst was geopolitical: The Trump administration’s surprise rollout of sweeping tariffs on all major trading partners, which hit the wires on Wednesday, April 2. It may go down as the “Liberation Day Crash.”
Chief Investment Officer Thierry Hasse
A Real-Time Stress Test
This isn’t a moment to debate policy or predict long-term winners and losers. Instead, we see value in using this real-time market stress as a chance to revisit your risk tolerance and re-evaluate your portfolio’s role in your long-term financial plan.
Heading into last week, a typical balanced portfolio — 60% equities, 40% fixed income — was down roughly 2% year-to-date. Not ideal, but expected after two years of strong gains. Then came the shock.
Last week’s market drop rattled nearly every investor. But instead of panicking — or burying your head in the sand — rational investors should pause and ask:
“Is this an emergency that deserves the glass to be broken?”
One way to answer that question is to evaluate how your portfolio actually performed — and whether that performance aligns with your goals. Just as importantly, how do you feel? This live market stress test can reveal a lot about your true risk tolerance.
Which Type of Investor Are You?
After a week like this, most investors fall into one of three groups:
Note: These are broad categories meant to illustrate typical responses across a wide spectrum of financial positions and emotional reactions. They do not reflect any particular investor or client and are not intended as individualized advice.
- Your portfolio is flat or slightly down.
Congratulations. You’re either extremely well-diversified or holding more defensive positions. This is your moment to consider slowly increasing your equity exposure. You don’t need to jump in all at once — consider reallocating 1% this month, 2% next month, and gradually shifting toward high-quality U.S. stocks that are now trading at better valuations. - You’re down 5% to 10% for the year.
This is painful but not disastrous. It likely means your asset allocation is appropriately balanced. If you’re feeling anxious — let’s say above an 8 on a scale of 1 to 10 — it may be wise to wait for markets to stabilize (look for two weeks of reduced volatility), then selectively shift some equity holdings into short-term Treasury securities. The goal isn’t to time the market, but to rebalance with care. - You’re down 10% to 20% for the year.
This may indicate you’ve taken on more risk than your situation warrants.
- If you’re under 50, you can likely ride it out and use this as a learning experience to revisit your allocation when markets recover.
- If you’re nearing retirement, however, the picture is different. It’s time to make thoughtful adjustments. Start by raising some cash. That may mean selling underperformers you’ve held onto too long—names like GameStop, Peloton or even Intel. In taxable accounts, these can generate useful tax losses. Also consider taking gains (or minimizing losses) from resilient, dividend-heavy stocks — AT&T, Verizon or Eli Lilly, for instance — that have served as a buffer during the downturn. Reinvest proceeds in short-term Treasuries to reduce portfolio volatility and, equally important, your stress levels. Finally, review for concentrated positions. In times like these, no single stock should dominate your portfolio. Any position over 4% should be closely examined.
What’s Next?
The selling has been fast and furious. It’s likely that we’ll see a short-term bottom soon, though that doesn’t mean smooth sailing ahead.
We do not expect the Federal Reserve to step in immediately. In fact, Fed Chairman Jerome Powell struck a notably casual tone in Friday’s remarks — downplaying the tariff news, joking about his tie color, and reiterating that it’s “too soon to assess” the policy’s impact.
For long-term investors, the biggest mistake now is to retreat entirely to the sidelines. Timing the market is hard enough in normal conditions — right now, it’s near impossible.
At Elevage Partners, We Anticipate — We Prepare
If you’re feeling rattled, that’s OK. Let’s talk through what this moment means for your plan and how to move forward with clarity.
Disclosure
This material is for informational purposes only and is not intended to be investment advice or a recommendation to take any particular course of action. The examples used are broad generalizations across a range of investor experiences and are not reflective of any specific client or situation. Each individual’s circumstances are unique, and financial decisions should be made based on personal goals, risk tolerance and time horizon. Investing involves risk, including the potential loss of principal. The information contained herein represents the views of Elevage Partners at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein In addition, there can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Any statement non-factual in nature constitutes only current opinion which is subject to change. These materials are provided for informational purposes only and do not constitute investment advice. Any reference to a security listed herein does not constitute a recommendation to buy, sell, or hold such security. Past performance is no guarantee of future results. The historical returns of any securities and/or sectors mentioned in this commentary are not necessarily indicative of their future performance.