By Juliana Vasquez | Staff Writer
Over the last six months, the U.S. stock market graphs have shown jagged zig-zags that may appear alarming to the untrained eye.
The fluctuations began on April 2, with a steep market dip where the Dow Jones Industrial Average fell 10%.
Stock prices shift in response to supply and demand, with investors distinguishing between positive and negative news about their stocks. When investors receive positive news, they invest more in the market. When they receive negative news, they pull out. This is often referred to as negativity bias, which leads investors to impulsively sell their stocks out of fear when they hear bad news.
Investopedia reports that on April 2, President Donald Trump “announced that the U.S. would impose a minimum 10% tariff on nearly all countries.” This announcement, known as the Liberation Day tariffs, led to a plunge in stock prices. As Trump has since set and scaled back different tariff policies, the stock market has fluctuated with it.
Baylor Finance Professor Dr. Erik Davidson said the stock market has recently been very focused on international issues due to trade announcements.
“Generally, tariffs are considered to be negative for economic well-being,” Davidson said. “So initially, stock markets around the world sank following the imposition of the Liberation Day tariffs. However, since then, the U.S. stock market has rebounded dramatically.”
Davidson said it’s natural for people to impulse-sell their stocks when they see the market dropping.
“Our fear of missing out entices us to buy when stocks have gone up, while our fear of loss causes us to sell when stocks have gone down,” Davidson said.
Although the market looks scary to student investors, Davidson noted that its volatility is very typical.
“It is the uncertainty that provides the return opportunity for investors,” Davidson said. “No risk equals no returns. In order to earn a return, investors must be willing to take risk.”
Kapalua, Hawaii, junior Tristan Demotica said the initial announcements of the tariffs made him scared as a student investor.
“At the beginning I was feeling kind of worries, especially … [with] Trump going back and forth, which made the market very very hesitant on certain equities,” Demotica said.
For students hoping to invest in today’s volatile stock market, Davidson encouraged them to keep their financial goals in mind and invest.
“Students should generally be making long-term focused investments,” Davidson said. “You may not have a lot of money right now, but you likely have decades of life in front of you, so time is on your side.”
