MW Do you have too much of your money in the stock market?

By Philip van Doorn

Also: Where to find bargains after stock prices have dropped, how to prepare for a recession and what Apple might do to keep iPhone prices from soaring

Here's a quick summary of policy-driven volatility: The S&P 500 rose 9.5% on Wednesday after President Donald Trump announced a 90-day pause for most of the new or increased tariffs he had placed on goods imported from scores of countries. That gain followed a 12.1% decline for the large-cap U.S. benchmark stock index through Tuesday from when Trump made his initial "liberation day" tariff announcement after the close on April 2. Then, on Thursday, investors were back in the red with a 3.5% decline for the day. The index ended Thursday with a 10.1% decline for 2025.

This year's decline for the S&P 500 SPX has followed gains of 23.3% in 2024 and 24.2% in 2023, which followed a decline of 19.4% in 2022. All of the preceding figures exclude dividends.

During the worst of this year's market tumult, have you been tempted to sell into the sliding market? Or have you tried to time the market?

It is a well-known phenomenon that investors who move to the sidelines to avoid a stock-market decline will likely return well after a recovery has started and thus hurt their long-term performance. Meanwhile, if you invest automatically every pay period into a retirement account, you will pay lower prices during periods of market weakness, which can enhance your returns over the years.

All of this brings us to discussions of portfolio allocation. How much of your portfolio is invested in stocks and how much is in bonds? During the mostly bullish stock-market trend as the largest technology companies soared over the past several years, the old "60/40 portfolio," with stocks making up 60%, might have seemed a quaint notion. Why miss out on such gains?

But Paul Merriman looked at stock-market data going back to 1970, which showed how reducing the equity allocation within a portfolio might have worked out well for investors with lower risk tolerance. For example, from 1970 through 2024, if your portfolio was 100% invested in the S&P 500, your average annual return, with dividends reinvested, would have been 10.9%. But if you had gone with a portfolio of 80% stocks and 20% government bonds, your average return would have been 10.2%. A lower allocation to stocks might make it easier for you to wait and ride through the storm during a stock-market crash. It might help you to avoid the temptation of locking in losses by selling into the down market.

Merriman dug further into how different portfolio allocations would have lowered investors' volatility risk and provided three guidelines to help you figure out how much stock-market risk is appropriate for your investment portfolio.

Timely advice: Stock-market extremes are the norm now. 'The key is to not get emotional.'

And a look at technical factors: The stock market may be soaring, but here's where the sellers are likely waiting

The most disturbing reaction to Trump's tariff policy wasn't in the stock market

Day-to-day market action can cause even President Donald Trump to change his mind.

Naturally, the stock market has been the focus of coverage as Trump's tariff policies have shifted. But the bond market is much larger. Estimates vary, but LSEG's numbers indicated that at the end of 2023, the global bond market was close to four times as large as the equity market, based on bonds' notional or face values.

Joseph Adinolfi explained how institutional investors were scrambling as U.S. Treasury bond prices fell. Investors normally expect government bonds to be a haven as stocks decline. But the yield on 10-year Treasury notes BX:TMUBMUSD10Y climbed to 4.44% early Friday from 4.01% a week earlier. As bond yields rise, their market prices fall, and vice versa.

More bond-market coverage:

-- Punishing bond-market selloff likely forced Trump's 90-day tariff delay: former J.P. Morgan chief strategist

-- Treasury Secretary Bessent expects bond market will calm down, suggests spike in yields is normal trading

-- Why bond-market tumult likely peaked Wednesday morning - before Trump's tariff flip-flop

A related threat to tech stocks

Laila Maidan explained how the bond market can affect valuations for stocks in an industry you might expect to be immune from tariffs.

Related: Buying tech stocks now? Here are the biggest do's and don'ts.

Are you ready to buy?

Customary advice among money managers is to buy stocks after prices have pulled back. The S&P 500's forward price-to-earnings ratio was 19.1 as of Thursday's close, after trading at a forward P/E as high as 22.6 over the previous 12 months, according to FactSet. The forward P/E ratios are prices divided by rolling consensus earnings-per-share estimates, weighted by market capitalization.

At Thursday's close, the S&P 500's forward P/E was slightly above its 10-year average forward P/E of 18.6.

Michael Brush interviewed David Giroux, who manages the $63 billion T. Rowe Price Capital Appreciation Fund PRWCX, which is rated five stars (the highest rating) within Morningstar's "U.S. Large Blend" investment category. The fund is closed to new investors, however, the new T. Rowe Price Capital Appreciation Equity ETF TCAF also invests in stocks selected by Giroux.

Giroux described "compelling" value in two industries, while also making the case for two out of the "Magnificent Seven" tech-oriented stocks that dominated the bull market in 2023 and 2024.

More: Investors are shunning America. This wealth management giant says, actually, U.S. stocks are attractive.

The Social Security timeline

Many MarketWatch readers are worried about Social Security. The agency has been cutting staff under Trump's Department of Government Efficiency initiative, and that gives rise to concern that any problems with individuals' benefit payments might be more difficult to solve. Here is Alessandra Malito's timeline for everything that has happened with Social Security this year, including the latest events.

More coverage for retirees: Should I rush to take my required minimum distribution while the S&P 500 is down, or wait until the end of the year like normal?

How to prepare for a recession

JPMorgan Chase & Co. $(JPM)$ Chief Executive Jamie Dimon said this week he thought a recession was likely, in the wake of Trump's tariff announcements.

Wells Fargo & Co. $(WFC)$ CEO Charles Scharf said on Friday that the bank was "prepared for a slower economic environment in 2025."

Beth Pinsker shared 11 ways to prepare for a recession from financial professionals, based on lessons they learned during previous periods of economic decay.

Read on: Seven smart money moves to make instead of checking your battered 401(k) right now

The Moneyist tackles the hardest challenge for investors

Quentin Fottrell - the Moneyist - helped readers through their emotional reactions to the stock market's gyrations:

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

-- My grandmother is in her 70s and has $400K in stocks. Is now the time to unload them?

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

-- 'I've made the most money over the last 30 years buying solid companies in terrible markets': Should I start buying?

Another consequence, unless Trump really changes his stance on tariffs

A 90-day pause on tariffs was enough to send stocks into a partial recovery on Wednesday from recent losses. But Trump didn't suspend his tariffs on goods imported from China - that latest import-tax rate is 104%.

Read: U.S.-China trade war is heating up - and $650 billion in goods and services is at stake

Aarthi Swaminathan and Andrew Keshner dug into U.S. housing data to explain why Trump's tariffs can push up homeowners' insurance premiums and which areas are expected to be hit hardest from rising costs.

An interview: 'Dumbest trade war in history' will put homeownership even further out of reach, Elizabeth Warren says

What will Apple do to keep iPhone costs down for Americans?

Bank of America analyst Wamsi Mohan has estimated that Apple Inc. $(AAPL)$ makes 70% of its iPhones in China. This risk was highlighted during the supply disruptions brought about by the COVID-19 pandemic in 2020.

Trump's targeting of China as part of his fluctuating tariff policy raises an obvious risk to people who love their iPhones and will eventually need to upgrade - and of course, to Apple's shareholders.

Therese Poletti outlined steps Apple might take to keep the iPhone's price from rising.

More Big Tech developments:

-- Nvidia's stock retreats, but analysts aren't buying into tariff fears right now

-- Nvidia rules the AI chip market. Here's what Amazon's CEO wants to do about that.

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-Philip van Doorn

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April 11, 2025 13:04 ET (17:04 GMT)

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