MW I'm 5 years from retiring and moved my money into non-U.S. stocks. Was that a big mistake?

By Quentin Fottrell

U.S. stocks all made historic gains on Wednesday - before erasing much of them on Thursday

April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of "Financial Fitness" articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.

Dear Quentin,

I need advice, and I want to avoid political arguments. I think the current administration's tariffs will eventually lead to a massive recession, if not worse, over the coming year. About four months ago, I moved the bulk of my retirement funds into international stocks and blue-chip funds. So far, I have made a 5% positive return this calendar year.

I have invested most of it in dividend-paying stocks and gold. That has been roughly flat this year. With retirement only about five years off, what do you recommend to achieve a roughly 3% or more positive return at this point? Some companies may bring money back to the U.S., which will stabilize the dollar for a bit, but I'm worried about the long term.

Nearing Retirement

Related: 'I'm terrified': I'm 63 and nearing retirement. How should I invest my $80,000 inheritance?

Dear Nearing,

For every investor like you who moves their money into U.S. stocks, another will stay the course.

After entering correction territory, stocks rebounded Wednesday when President Trump suspended his country-specific tariffs for 90 days (a move that excluded China). The S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq COMP all made extraordinary, even historic, gains Wednesday before erasing much of those gains on Thursday.

What does it all mean? The magic word to achieve your goal is diversification. You rebalanced your portfolio based on your own instinct and appetite for risk. If this turns out to be a prolonged bear market, you may be happy. You also need to plan for your retirement itself, which could last another 30 years. Over the decade, U.S. equities rose 15% on average a year, with U.K. equities rising 6%.

Your goal should be closer to a 10% annual return over time, accounting for ups and downs in the market during your lifetime. The S&P 500 fell 18% in 2022, gained 26% in 2023, rose another 25% in 2024, and historical data show that over the last century, bear markets have accounted for just over 20% of those years. So the long-term momentum points up.

At times of economic and market turmoil, analysts recommend healthcare, utilities and consumer-staples stocks for the medium and long term, in addition to mid- and small-cap equities, bonds, cash and non-U.S. equities. You've obviously gone big on the latter, but financial advisers time and again caution people against trying to time the market.

Bear markets are normal

A market correction, as you no doubt are aware, is a fall of 10% from a recent peak and a bear market is defined as a 20% fall from a recent high. But the rewards in a bull market are far greater than the losses in a bear market. Stocks lose 35% on average in a bear market versus a gain of 111% during a bull market, according to the Hartford Funds.

"A bear market doesn't necessarily indicate an economic recession," the investment management group adds. "There have been 27 bear markets since 1928, but only 15 recessions during that time. Bear markets often go hand in hand with a slowing economy, but a declining market doesn't necessarily mean a recession is looming."

As hefty and surprising (for many) as these tariffs have been, we can expect to live through roughly 14 bear markets over a 50-year period, Hartford Funds says. "Although it can be difficult to watch your portfolio dip with the market, it's important to keep in mind that downturns have always been a temporary part of the process," it says.

We are living in a period where the Trump administration has decided to redraw international trade maps. Supporters of the administration - and the president - have said people may have to brace for short-term pain for long-term gain to make the U.S. more economically independent and boost U.S. manufacturing. Economists, for the most part, disagree.

Don't miss: 'This is not in my tolerance level': I inherited a $600K portfolio from my father. Should I move it all into bonds?

New economic era

Over the last five years, we've had a worldwide pandemic, a new administration that is forging a different course from all previous Republican and Democratic administrations in modern times by redefining the postwar Western alliance, and introducing sweeping tariffs, which were announced on April 2, a date Trump referred to as "liberation day."

We are entering a new era, assuming the bulk of the tariffs go ahead in their current form. Economists have upped their predictions of a recession happening in the near-term. Goldman Sachs $(GS)$ now puts those odds at 45%, and expects the Federal Reserve to reduce interest rates by 25 basis points, starting in June, in the next three committee meetings.

Given that you say you want to avoid political debate, and focus on financial issues - the preserve of this column - it's important to note that opinions do vary on the eventual outcome, and to note that President Trump won the popular vote on the back of well-publicized policy stances, including his plans to introduce more tariffs.

Billionaire Andy Beal, the founder of Beal Bank, told MarketWatch this week that the federal government's deficit spending was unsustainable and was effectively propping up the U.S. economy. "A dollar of government borrowing and spending is not the same as a dollar earned by inventing or building a widget," he said.

Don't miss: 'The cost is a big unknown': Should I buy a new car to avoid auto tariffs - or wait and hope that Trump suspends them too?

Staying the course

He said he disagreed with Bill Ackman, the hedge-fund manager, who posted on X on Sunday, urging Trump to introduce a "90-day timeout" on some of his most stringent tariffs to avoid an "economic nuclear winter." If Trump imposes such tariffs worldwide, "business investment will grind to a halt, consumers will close their wallets and pocket books," he wrote.

"When markets crash, new investment stops, consumers stop spending money, and businesses have no choice but to curtail investment and fire workers," Ackman added. Meanwhile, pessimistic Mark Spitznagel, the founder and chief investment officer of hedge fund Universa Investments, told MarketWatch he sees an "80% crash" when this is over.

As for your five-year window to retirement: The last 15 recessions produced negative returns for 17 months on average, according to Russell Investments, with an annualized cumulative decline of 14.8% and an average fall in gross domestic product of 4.6%. The Great Depression, from August 1929 to March 1933, had a total U.S. stock pullback of around 74%, it says.

"U.S. stock market peaks and troughs are often independent of the beginning and ending of recessions, with peaks occurring as early as 22 months before the start of a recession," Russell Investments says. "On average, the U.S. stock market peaks five months before the start of a recession. In 2020, the market peaked on Feb. 19, nine days before the official start."

I understand your caution. You, at least, made these decisions before the tumble in U.S. equities in recent days and weeks. The closer you get to retirement, the more you should hedge your exposure to equity markets. Of those stocks, T. Rowe Price suggests 60% in U.S. large caps, 10% in U.S. small caps, 25% in developed non-U.S. stocks and 5% in emerging markets.

Investing in your 60s

In your 60s, you should have up to 50% in equities, with the rest held in bonds and, perhaps, 10% or so in cash for emergencies, according to T. Rowe Price. However, it obviously depends on your own risk tolerance. You have chosen to get out of U.S. equities, which have traditionally outperformed many international stock markets.

"Retirement can last up to three decades or more, meaning your portfolio will still need to grow in order to support you," it adds. "Exposure to stocks should remain an important part of your allocation target, even in retirement. However, a possible need to access these assets for income in the near term means you are more susceptible to short-term risks."

Miklos Ringbauer, founder of MiklosCPA, suggests a three-way meeting with your tax adviser and money manager. "It is especially important as when losses are realized during the investment rebalancing process, the taxpayer may only be able to deduct $1,500 if filing separately or $3,000 for single/married filing jointly for 2025 against any other income," he says.

Good luck with your new international, blue-chip strategy. Those in their 30s, 40s and 50s may have exactly the same experience when they near retirement - with yet another bear market, yet another recession, and persistent fears that this time it will be different, and the world's economies and markets will take years to recover.

Historical data does not support doomsday theories.

Don't miss: I've made the most money over the last 30 years buying solid companies in terrible markets': Should I start buying?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

My portfolio lost 20%. With Trump's trade war, do I sell my stocks and buy gold?

Will Trump's policies lead to a recession? I'm 62 and earn $50K. How should I invest $100,000?

'I'm not being a troll': I bought 'DJT' stock and I'm down 50%. I'm sweating. What now?

Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

MW I'm 5 years from retiring and moved my money into non-U.S. stocks. Was that a big mistake?

By Quentin Fottrell

U.S. stocks all made historic gains on Wednesday - before erasing much of them on Thursday

April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of "Financial Fitness" articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.

Dear Quentin,

I need advice, and I want to avoid political arguments. I think the current administration's tariffs will eventually lead to a massive recession, if not worse, over the coming year. About four months ago, I moved the bulk of my retirement funds into international stocks and blue-chip funds. So far, I have made a 5% positive return this calendar year.

I have invested most of it in dividend-paying stocks and gold. That has been roughly flat this year. With retirement only about five years off, what do you recommend to achieve a roughly 3% or more positive return at this point? Some companies may bring money back to the U.S., which will stabilize the dollar for a bit, but I'm worried about the long term.

Nearing Retirement

Related: 'I'm terrified': I'm 63 and nearing retirement. How should I invest my $80,000 inheritance?

Dear Nearing,

For every investor like you who moves their money into U.S. stocks, another will stay the course.

After entering correction territory, stocks rebounded Wednesday when President Trump suspended his country-specific tariffs for 90 days (a move that excluded China). The S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq COMP all made extraordinary, even historic, gains Wednesday before erasing much of those gains on Thursday.

What does it all mean? The magic word to achieve your goal is diversification. You rebalanced your portfolio based on your own instinct and appetite for risk. If this turns out to be a prolonged bear market, you may be happy. You also need to plan for your retirement itself, which could last another 30 years. Over the decade, U.S. equities rose 15% on average a year, with U.K. equities rising 6%.

Your goal should be closer to a 10% annual return over time, accounting for ups and downs in the market during your lifetime. The S&P 500 fell 18% in 2022, gained 26% in 2023, rose another 25% in 2024, and historical data show that over the last century, bear markets have accounted for just over 20% of those years. So the long-term momentum points up.

At times of economic and market turmoil, analysts recommend healthcare, utilities and consumer-staples stocks for the medium and long term, in addition to mid- and small-cap equities, bonds, cash and non-U.S. equities. You've obviously gone big on the latter, but financial advisers time and again caution people against trying to time the market.

Bear markets are normal

A market correction, as you no doubt are aware, is a fall of 10% from a recent peak and a bear market is defined as a 20% fall from a recent high. But the rewards in a bull market are far greater than the losses in a bear market. Stocks lose 35% on average in a bear market versus a gain of 111% during a bull market, according to the Hartford Funds.

"A bear market doesn't necessarily indicate an economic recession," the investment management group adds. "There have been 27 bear markets since 1928, but only 15 recessions during that time. Bear markets often go hand in hand with a slowing economy, but a declining market doesn't necessarily mean a recession is looming."

As hefty and surprising (for many) as these tariffs have been, we can expect to live through roughly 14 bear markets over a 50-year period, Hartford Funds says. "Although it can be difficult to watch your portfolio dip with the market, it's important to keep in mind that downturns have always been a temporary part of the process," it says.

We are living in a period where the Trump administration has decided to redraw international trade maps. Supporters of the administration - and the president - have said people may have to brace for short-term pain for long-term gain to make the U.S. more economically independent and boost U.S. manufacturing. Economists, for the most part, disagree.

Don't miss: 'This is not in my tolerance level': I inherited a $600K portfolio from my father. Should I move it all into bonds?

New economic era

Over the last five years, we've had a worldwide pandemic, a new administration that is forging a different course from all previous Republican and Democratic administrations in modern times by redefining the postwar Western alliance, and introducing sweeping tariffs, which were announced on April 2, a date Trump referred to as "liberation day."

We are entering a new era, assuming the bulk of the tariffs go ahead in their current form. Economists have upped their predictions of a recession happening in the near-term. Goldman Sachs (GS) now puts those odds at 45%, and expects the Federal Reserve to reduce interest rates by 25 basis points, starting in June, in the next three committee meetings.

Given that you say you want to avoid political debate, and focus on financial issues - the preserve of this column - it's important to note that opinions do vary on the eventual outcome, and to note that President Trump won the popular vote on the back of well-publicized policy stances, including his plans to introduce more tariffs.

Billionaire Andy Beal, the founder of Beal Bank, told MarketWatch this week that the federal government's deficit spending was unsustainable and was effectively propping up the U.S. economy. "A dollar of government borrowing and spending is not the same as a dollar earned by inventing or building a widget," he said.

Don't miss: 'The cost is a big unknown': Should I buy a new car to avoid auto tariffs - or wait and hope that Trump suspends them too?

Staying the course

He said he disagreed with Bill Ackman, the hedge-fund manager, who posted on X on Sunday, urging Trump to introduce a "90-day timeout" on some of his most stringent tariffs to avoid an "economic nuclear winter." If Trump imposes such tariffs worldwide, "business investment will grind to a halt, consumers will close their wallets and pocket books," he wrote.

"When markets crash, new investment stops, consumers stop spending money, and businesses have no choice but to curtail investment and fire workers," Ackman added. Meanwhile, pessimistic Mark Spitznagel, the founder and chief investment officer of hedge fund Universa Investments, told MarketWatch he sees an "80% crash" when this is over.

As for your five-year window to retirement: The last 15 recessions produced negative returns for 17 months on average, according to Russell Investments, with an annualized cumulative decline of 14.8% and an average fall in gross domestic product of 4.6%. The Great Depression, from August 1929 to March 1933, had a total U.S. stock pullback of around 74%, it says.

"U.S. stock market peaks and troughs are often independent of the beginning and ending of recessions, with peaks occurring as early as 22 months before the start of a recession," Russell Investments says. "On average, the U.S. stock market peaks five months before the start of a recession. In 2020, the market peaked on Feb. 19, nine days before the official start."

I understand your caution. You, at least, made these decisions before the tumble in U.S. equities in recent days and weeks. The closer you get to retirement, the more you should hedge your exposure to equity markets. Of those stocks, T. Rowe Price suggests 60% in U.S. large caps, 10% in U.S. small caps, 25% in developed non-U.S. stocks and 5% in emerging markets.

Investing in your 60s

In your 60s, you should have up to 50% in equities, with the rest held in bonds and, perhaps, 10% or so in cash for emergencies, according to T. Rowe Price. However, it obviously depends on your own risk tolerance. You have chosen to get out of U.S. equities, which have traditionally outperformed many international stock markets.

"Retirement can last up to three decades or more, meaning your portfolio will still need to grow in order to support you," it adds. "Exposure to stocks should remain an important part of your allocation target, even in retirement. However, a possible need to access these assets for income in the near term means you are more susceptible to short-term risks."

Miklos Ringbauer, founder of MiklosCPA, suggests a three-way meeting with your tax adviser and money manager. "It is especially important as when losses are realized during the investment rebalancing process, the taxpayer may only be able to deduct $1,500 if filing separately or $3,000 for single/married filing jointly for 2025 against any other income," he says.

Good luck with your new international, blue-chip strategy. Those in their 30s, 40s and 50s may have exactly the same experience when they near retirement - with yet another bear market, yet another recession, and persistent fears that this time it will be different, and the world's economies and markets will take years to recover.

Historical data does not support doomsday theories.

Don't miss: I've made the most money over the last 30 years buying solid companies in terrible markets': Should I start buying?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

More columns from Quentin Fottrell:

My portfolio lost 20%. With Trump's trade war, do I sell my stocks and buy gold?

Will Trump's policies lead to a recession? I'm 62 and earn $50K. How should I invest $100,000?

'I'm not being a troll': I bought 'DJT' stock and I'm down 50%. I'm sweating. What now?

Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.

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April 10, 2025 14:15 ET (18:15 GMT)

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