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The past 6 months have seen so many scary economic headlines that you just kind of get numb to it. Tariffs are going up! No wait, they’re paused! Now they’re back on again!
But last Friday really took the cake.
It started with (yet) another announcement of tariffs. Across-the-board tariffs of 10%-15% tariffs on all countries, plus a bunch of other random numbers that were made up targeting specific countries. India’s at 25%, Switzerland’s is at 39%, and Canada’s got jacked up to 35% because we didn’t do enough to stop the made-up fentanyl that wasn’t poring across the borders.
Then the blockbuster US jobs report, not only showing anemic job growth for July, but massively revising downwards the jobs data for May and June. Remember when they reported surprisingly strong job growth of 150k jobs added? Well, psych! It’s actually closer to 15k, or 90% down from where they were. That makes these past 3 months the weakest jobs report in 16 years, second only to the pandemic.
And then to really jump the crazy factor to 11, Trump responded to this evidence that his policies were harming the economy by firing the economist in charge of the Bureau of Labour Statistics.
President Donald Trump has fired Dr. Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, whom he accused, without evidence, of manipulating the monthly jobs reports for “political purposes.”
There’s no other way to see this as anything other than an insanely reckless move. Institutions like the Federal Reserve depend on getting accurate information on the health of the economy to make decisions on monetary policy, and now they can’t trust the data coming out of the BLS anymore.
If the US economy were a plane, the unemployment data would be the fuel gauge, and last Friday it was flashing a warning light that fuel was running low. Rather than do something about it, the president decided to punch out the fuel gauge.
All this means that there’s more volatility ahead, both in the stock markets and in interest rates. We don’t know which way either will go now, because we have no idea whether the job market is healthy or shedding.
So how should we, the FIRE investors, respond to this shocking new development?
Manage Your Cash
When times are scary and jobs seem shaky, it’s more important than ever to review your debt and cash levels.
This means keeping your debt levels as low as possible. This means paying off as much high-interest debt as you can, and, even more importantly, not getting into any more. Debt is like a pile of gasoline-soaked rags in your basement. Sure, it might not be dangerous now, but if a spark goes anywhere near that thing, then poof! Your life goes up in flames. Now is definitely not the time to buy a house.
Secondly, make sure your emergency fund is well stocked. This is typically 6 months of living expenses put into a high-yield savings account, and honestly, I would be more comfortable with a year at this point. The job market is already deteriorating, and it will likely get worse as the effects of all these tariffs hit, and when layoffs are widespread, finding a new job may take a lot longer than normal.
Stay Invested
This might seem counter-intuitive, but now is not the time to sell everything and go all into cash.
If you’re investing towards FIRE, your investment timeframe is naturally very long. At minimum, your investment horizon is decades into the future. This is because even when you retire, you’re supposed to stay invested to keep your portfolio growing even as you withdraw from it to live off of.
And as a long-term investor, you should ignore the day-to-day gyrations in the stock market and the big scary news stories that pop up on your feed. I don’t know what’s going to happen in the news tomorrow, next week, or next month. But I do know that as long as people get up every morning and go to their jobs, they will continue producing goods and services that people need. This creates value, which creates wealth, and as a long-term owner of the companies these people work for, that wealth flows to you.
That doesn’t mean that it will be smooth. Far from it. Conflicts, natural disasters, and trade wars will always ensure that the stock market, and your portfolio, will whipsaw up and down as each subsequent calamity makes investors flee for the exits, only to return again once the dust settles.
A short term investor, like a day trader, tries to predict and outguess these movements. But studies have show that only a vanishingly tiny percentage of investors are able to pull this off consistently.
It’s far easier to be a long term investor. If you’re fortunate enough to avoid getting laid off, ignore the news and keep investing (after your emergency fund is full, of course!).
2008 also seemed like a big scary calamitous event, but in hindsight it turned out to be a massive buying opportunity. Buy ploughing whatever cash you can spare every month into the markets, you will end up picking up more units at a discount, and when it rebounds (and it will rebound), you’ll be able to participate in that upside stronger than the downside.
Remember that The World is Bigger than the US
For as long as I’ve been an investor, the centre of the world’s economy was always the US. As the biggest economy and unquestioned superpower of the world, the US economy sets the tone for the rest of the world.
This year has turned that dynamic on its head.
Unlike in previous years where recessions were caused by wars, natural disasters, or other unforeseen world events, the current whipsawing of the markets is artificial and man-made. Take away the tariffs and the trade wars, and you actually have (or rather, had) a pretty healthy economy in the US.
And while tariffs with every trading partner will definitely slow the global economy, world governments around the world have reacted to this protectionism by diversifying their trade and trading more with each other.
This has resulted in the Canadian and European stock markets outperforming the US by a healthy margin this year.
Right now, the total US market is up 5.7% YTD. Canada’s TSX is up 8.8% YTD. And Europe, Australia and the Far East, as tracked by MSCI EAFE index, is up a stunning 15.6%!
If you follow our Workshop Portfolio, at least half of your equity allocation is in international markets, and that’s turned out to be a great move this year.
So even though Trump and his trade war has dominated financial news this year, remember to invest in a globally diversified way to hedge against any individual country’s politics from taking down your retirement.
Conclusion
Market uncertainty is nothing new, and learning to deal with it is the most important skill you can acquire as an investor.
After enduring multiple panic-inducing market meltdowns, including the Great Financial Crisis of 2008, I’ve learned that no matter what the cause of the meltdown, the cure is always the same.
Stay out of debt, keep your expenses low, and stay invested.
How about you? Are you planning on doing anything different in the face of this turmoil? Let’s hear it in the comments below!
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Great advice. Nothing different from us. No debt, own our house(s) and am self employed. Took some profits in the Market 2 weeks or so ago so have some cash to invest if we get a 5-7% pullback…which I am not anticipating. Fed will cut rates and up we go to all time highs. If not, buy the dip.
I wonder why you’re recommending only one year of emergency funds. Where did that number come from?
It can take a bear market up to 6 years to recover, and the average recovery time is 19 months.
Things are getting ugly out there.
I tried to buy a new rear windshield wiper for my car on Amazon. Price from 2 months ago: $13.99. Price today: $20.99
Also, millions will see their health insurance premium go up by 57%+.
Yikes!!
Good luck, friends.
I’m actually amazed that the US market has been able to rebound at all after its slide into authoritarianism this year. Once a country leans towards cooking its economic numbers to maintain its image, that should logically spell the end for global trust in its markets.
But I’ve learned my lesson the hard way going through the Covid crash and recovery. What seems obvious in the moment rarely pans out that way in the future.
Buy and hold. Diversify across geographies, assets, and time. Pessimists get to sound smart; optimists get rich.
Due to layoffs, I have only worked 5 months since Feb 2024. In that time my account increased 400K to my FIRE amount of 2 million! Future is impossible to predict. And thanks in part to your book I finally switched to DIY Feb 2025. I re-read your investment workshop on a regular basis.
I wonder why you’re recommending only one year of emergency fund. Where did that number come from?
It can take a bear market up to 6 years to recover, and the average recovery time is 19 months.
Things are getting ugly out there.
I tried to buy a new rear windshield wiper for my car on Amazon. Price from 2 months ago: $13.99. Price today: $20.99
Also, millions will see their health insurance premium go up by 57%+.
Yikes!!
Good luck, friends…
I remember you guys wrote about a “cash cushion” that was substantially larger than the 1-year emergency fund… but I guess that was when your withdrawal rate was higher than it is now.
What’s the latest on that?
I remember you guys wrote about a “cash cushion” that was substantially larger than the 1-year emergency fund… but I guess that was when your withdrawal rate was higher than it is now.
What is the latest on that?
I adopted their Cash Cushion idea, so we’re good for five to six years of terrible markets. No Orange blob is going to destroy our retirement.
A prudent article in these times. You cant help but sense a major buying oppertunity is coming.
Kill me if you must, but I’m 10% cash.
I’m not nervous or anything.
It’s just that, at these (US) valuations, cash is worth more.
Greetings from Taipei, Taiwan! American prof here with a massive teaching load coming in the first semester. Hooray for the opportunity to pile up some cash! I know that Dave Ramsey says to not try to time the market, but I’m hoping to buy the dip. Please don’t rat me out to Dave!!!!!!!!
—
I’m doing Professor Stuff in a comfy coffee shop and the power just went out. There’s a burning smell, and the lights are still out. Internet is working, so I can still work. It’s raining cats and dogs outside. No biggie; I’ve seen much worse. First World Problem!
—
All this will pass: tariffs, economy stuff, the darkness, the rain, all of it.
Dan V
Taipei
Did you fully write the article yourselves? Sounds a bit different but that may just be me…
The cash cushion also seemed different?
I thought the same. It was missing something today.
Yeah, the US days as the only super power are over. Multipolar world now baby.
Also, look at what’s going on in the US, specifically TX and the power grab house packing that Reps are doing. That’s inches away from a civil war or totallitarism. I don’t think we’ll see another Dem president or majority in many years if this takes place.
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Sure, it might not be dangerous now, but if a spark goes anywhere near that thing, then poof! Your life goes up in flames. Now is definitely not the Basketball Bros to buy a house.
That’s a sharp observation—it highlights how GeoGuessr Free policy decisions, rather than external crises, can create instability even in an otherwise strong economy.
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