President Donald Trump's "Liberation Day" tariffs sent the stock market into a tizzy, with stocks trading sharply lower following the announcement. The much worse-than-expected tariffs add another wrinkle to a market that was already struggling due to rising tension between the U.S. and its neighbors Canada and Mexico over potential tariffs as well as general economic uncertainty.
These tariffs will not be good for the consumer or the economy. China has already hit the U.S. with retaliatory tariffs, sparking what could become an all-out global trade war. The Trump administration responded to China's announcement by promising an additional 50% tariff on all goods from China if it enacts its retaliatory tariffs.
This looming trade war could keep the pressure on stocks for a while. That said, President Trump can be unpredictable and likes to bargain, so these tariffs could instead be short-lived. While White House aides have said that tariffs are not a negotiating tool, Trump has already come out and said he is open to negotiations.
What that leaves the market with is a lot of continued uncertainty. And the one thing the market hates more than anything is uncertainty.
Is this the start of a bear market?
One of the best ways to create long-term wealth is still through investing in stocks. While there will be market corrections and bear markets along the way, the major market indexes have always traded higher over the long run.
At the same time, market timing can be very difficult. If the stock market were to officially enter a bear market (it's still unofficial as of this writing), the depth and duration would be unpredictable. The median bear market lasts just over nine months, but individual ones can vary quite a bit. The COVID-19-related bear market was short and steep, and the rebound in stocks was quick and powerful. Meanwhile, the Great Depression bear market lasted years. Modern bear markets, though, have tended to be shorter.
In addition, when new bull markets start, the biggest gains tend to come at the beginning of the rally. Historically, the first month of a bull market generates a average return of nearly 14% for the S&P 500 index, while over the first three months, it rises more than 25%. However, there can also be some false starts along the way, in what is often referred to as a "dead cat bounce," where it appears stocks are rallying, but then they fall back to new lows.
Image source: Getty Images.
So what should an investor do?
Ultimately, an investor should not try to time the market and make major shifts to their portfolios, as nailing the timing on both ends is extremely difficult. You could get the timing right and move more toward cash before a fall, but then miss the rally.
I learned this lesson during the COVID bear market, where I quickly went to more cash. However, the bear market duration was so short and the rally so powerful that being right in the beginning didn't help my portfolio's performance one bit. I kept waiting for a dead cat bounce that never happened and would have been better off just staying invested.
As such, I think the best strategy for investors to use is dollar-cost averaging. This is where you invest a set amount of money at set intervals. This strategy isn't going to pick a bottom, but it's going to give you a very nice cost basis moving forward. The key is to be consistent, as a down market isn't going to last forever.
The perfect investment vehicle
One of the best investment vehicles to implement this strategy with is the Vanguard 500 ETF (VOO +1.23%). The exchange-traded fund (ETF) tracks the performance of the S&P 500, which consists of stocks of the 500 largest publicly traded companies in the U.S.
Data by YCharts.
The Vanguard 500 ETF has a track record of strong performance over the long run. The S&P 500 is a market-cap-weighted index, which means the larger the company (price multiplied by shares outstanding), the bigger the stock is as a percentage of the index. As such, an investment in the Vanguard 500 ETF is giving you investments in some of the biggest and best-run companies in the world.
As of the end of March, the ETF has generated a cumulative return of nearly 224% over the past 10 years, which equals an average annual return of nearly 12.5%. Since its inception in 2020, the ETF has produced an average annual return of 14%.
With the ETF down nearly 15% in 2025, as of this writing, this is a great time to start dipping your toe into the ETF. You can start with a small investment, like $1,000, and then use a dollar-cost averaging strategy to continue to build your position.
Then, whenever the market turns, you'll be on your way to achieving some great returns over the long haul.
