Earlier this week, Gary Cohn, the director of the National Economic Council and President Donald Trump’s top economic adviser announced that he has resigned from his post at the White House.
The former Goldman Sachs president and free trade advocate, Cohn, has decided to quit after Trump announced that he would impose import tariffs of 25% on steel and 10% aluminium, which could take effect as early as this week. Cohn argued against it, warning that it could spark a major trade war.
Following news of Cohn’s departure from the White House on Tuesday, S&P 500 futures dropped more than 1%. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.65%, while Japan’s Nikkei retreated 0.77%.
Australian stocks fell 1%, Hong Kong’s Hang Seng slipped 1.1% and China’s blue-chip CSI300 index lost 0.4%, according to Reuters.
“If you’re looking for an excuse to sell, this is the kind of announcement that certainly causes short-term downward pressure,” said Rick Meckler, president of investment firm LibertyView Capital Management in New Jersey, regarding Cohn’s resignation.
“He (Cohn) came from Wall street and certainly large institutional investors felt he was very credible.”
Although market fluctuations can sometimes seem drastic and even frightening, during times of volatility, seasoned investors Warren Buffett and Ray Dalio agree that it’s best to stay calm and stick to the basics.
“Don’t watch the market closely,” Buffett told CNBC amid wild market fluctuations. “If they’re trying to buy and sell stocks and worry when they go down a little bit … and think they should maybe sell them when they go up, they’re not going to have very good results.”
Buffett emphasized that holding onto investments long-term is crucial to having them pay off. “The money is made in investments by investing and by owning good companies for long periods of time,” Buffett told CNBC. “If they buy good companies, buy them over time, they’re going to do fine 10, 20, 30 years from now.”
Dalio adds that although it’s tempting to sell when the market begins to drop, giving in to your fear is not a good strategy.
“You’ve got to do the opposite. It’s when you’re not scared you probably want to sell, and when you are scared, you probably want to buy,” said Dalio, the founder of investment firm Bridgewater Associates who is worth an estimated $14.6 billion.
Both investors say that the best way to invest successfully is by not trying too hard to anticipate market fluctuations and by staying calm despite them.
Buffett explained that the markets are always going to be volatile, so the best thing any investor can do, regardless of experience, is to keep a level head.
“Though markets are generally rational, they occasionally do crazy things,” he wrote. “Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta.”
He continued, “What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”