Barry Ritholtz, chairman of Ritholtz Wealth Management, believes investors must suppress emotional reactions to the current market turbulence caused by President Trump’s shifting tariff policies.
In a conversation reflecting themes from his new book, How Not to Invest, Ritholtz emphasizes that long-term thinking remains essential even when headlines fuel volatility. He acknowledges the serious risks tariffs pose but urges investors to maintain discipline and avoid impulsive decisions.
According to Ritholtz, who oversees $5.7 billion in assets, markets have been whipsawed by Trump’s erratic trade policy announcements. However, he cautions that today’s challenges, while significant, must be viewed in historical context.
“Investors should always ask themselves if things are truly worse than during the financial crisis, the pandemic, or 9/11,” he says. Emotional reactions to constant newsflow, he warns, can derail prudent investment strategies. “The key,” he adds, “is to channel your inner Mr. Spock — remain logical and unemotional.”
Discussing the current environment, Ritholtz outlines a range of possible outcomes. His best-case scenario is that Trump’s tariffs are primarily a negotiation tactic and are eventually scaled back. While acknowledging legitimate grievances against China, he fears the White House is taking an unnecessary risk with the global economy.
The worst-case scenario he envisions involves a collapse of global trust in U.S. leadership, a weakening dollar, surging interest rates, a deep recession, and even a depression. Yet, he reassures investors that, historically, markets tend to settle somewhere between extreme outcomes — “in the fat part of the bell curve.”
Markets, Ritholtz explains, function as forward-looking discounting mechanisms for corporate revenues and profits. Until recently, markets did not seem to price in the potential disruption that tariffs could cause.
This, he argues, reflects a fundamental misunderstanding of the role global trade plays in corporate earnings. In Ritholtz’s view, tariffs are a dangerous bet on a $27 trillion economy, with highly asymmetric risk: at best, a marginal improvement; at worst, significant economic damage.
In his book, Ritholtz explores the concepts of uncertainty and the unknown, both highly relevant to today’s environment. He stresses that uncertainty is always present — pandemics, wars, and geopolitical events have repeatedly blindsided markets. However, what makes today’s situation uniquely precarious is the degree to which outcomes hinge on the decisions of a single individual.
Unlike broad-based market signals that involve millions of participants, today’s trade policies pivot unpredictably on one person’s impulses. Ritholtz likens this to the sweeping influence of historic figures like Genghis Khan or Julius Caesar — rare instances where an individual’s whims profoundly shifted global events.
A historical perspective, Ritholtz argues, offers important context. Since 1926, markets have weathered major crises — Pearl Harbor, the Kennedy assassination, 9/11 — and yet continued to grow over the long term.
Today’s 24/7 news cycle amplifies threats and fosters a sense of doom, but Ritholtz urges investors to recognize that an abundance of information is not the same as an abundance of existential risk. “We are better informed and more misinformed simultaneously,” he says.
When advising investors on how to respond, Ritholtz distinguishes between different cohorts. Those with long time horizons — funding a 529 plan, or a decade or more from retirement — should stay the course, despite the current administration’s “noisy” policy environment.
For those approaching retirement within the next year or two, however, a more cautious approach is warranted. Ritholtz acknowledges that retiring into a market downturn is difficult. Mitigation strategies may include working an extra year, reducing retirement withdrawals, or adjusting lifestyle expectations — none ideal, but necessary if facing a sequence-of-returns risk.
On broader market cycles, Ritholtz notes that while we’ve enjoyed a secular bull market driven by technological innovation, we remain vulnerable to policy missteps that could derail economic progress. Reflecting on history, he points to the tariffs of the 1930s as a cautionary example.
“We know how that movie ends,” he warns. Given the magnitude of potential consequences, he prefers probabilistic thinking and emphasizes the folly of risking massive economic damage for marginal gains.
For wealth advisors and RIAs counseling clients, Ritholtz’s message is clear: Encourage long-term thinking by studying history. Books like Black Monday offer important reminders that major market disruptions often stem from unproven, poorly understood policies. While technology evolves, human behavior — particularly fear and greed — remains remarkably consistent.
One of the most common investment mistakes Ritholtz identifies is a mismatch between a client’s risk profile and their portfolio positioning. Many younger investors remained underexposed to equities following the financial crisis, scarred by volatility and thus missing out on a historic bull market.
On the opposite end, successful executives sometimes end up with portfolios dangerously concentrated in single stocks — a classic case of overexposure and under-diversification. In both instances, Ritholtz emphasizes the importance of aligning risk exposure with financial objectives and life circumstances.
Behavioral mistakes are another critical pitfall. Elections, for instance, often provoke emotional overreactions. Ritholtz recalls clients wanting to sell everything after Trump’s 2016 victory and again after Biden’s 2020 win — despite markets performing well under both administrations. His advice remains consistent: avoid letting partisan reactions or media noise dictate investment strategy.
In cultivating a more rational investment mindset, Ritholtz encourages clients to “be like Mr. Spock.” Acknowledging emotions is natural, but establishing systematic decision-making frameworks in advance can prevent costly errors.
For clients who feel compelled to engage in speculative activity, he advocates for creating a small “cowboy account.” By limiting risk to a manageable percentage of one’s portfolio, investors can satisfy the psychological urge to take risks without jeopardizing their financial futures. “Just knowing it’s there,” he says, “helps you leave the core portfolio alone.”
Regarding concentrated positions in big winners like Nvidia or Tesla, Ritholtz promotes a framework of “regret minimization.” If realizing gains could be life-changing — paying off a mortgage, funding education, ensuring financial independence — that’s a strong signal to take action.
No stock, he reminds clients, remains dominant forever. Even once-mighty companies like General Electric eventually faltered. By applying regret minimization, investors can make prudent decisions they can live with comfortably.
On a lighter note, Ritholtz challenges the notion that minor expenditures — like a $5 latte — threaten financial security. Money, he emphasizes, is a medium of exchange meant to enhance life, not to hoard indefinitely. The key lies in using it effectively. Small expenses that facilitate meaningful experiences, like sharing coffee with a friend, are often money well spent.
Ultimately, Ritholtz’s message to wealth advisors and their clients is timeless: maintain a historical perspective, focus on long-term goals, guard against emotional decision-making, and recognize that uncertainty is not a reason to abandon sound investment principles.
In volatile times, emulating Mr. Spock’s logic and discipline can be the difference between lasting success and costly mistakes.
