Kansas investment experts outline strategies for economic downturn, market uncertainty

Yahoo

18-04-2025

President Donald Trump is displayed on a television screen as traders work on the floor of the New York Stock Exchange on April 7, 2025, in New York City. ()
TOPEKA — Investors watching the stock market jump up and down more times than a 6-month-old Lab puppy in recent weeks were able to take a breath as markets closed for Good Friday.
But one day off doesn't make up for the stress and uncertainty and expectations of more market chaos next week. Investment experts from American Century Investments, which manages the Kansas 529 Plan, offer advice heard during past market downturns — diversify.
'The only or best defense in volatile economic and market environments like this is diversification,' said Rich Weiss, senior vice president and chief investment officer, multi-asset strategies, at American Century Investments. 'You never know where the ball is going to land and which investments get favored or which suffer. You know, the markets hate uncertainty. It's anathema to the market more than anything, and this is toxic uncertainty, which is a term I borrowed from Scott Galloway.'
Weiss, who brings a dry wit to talking about investment strategies and what's happening in the volatile stock market, offered his assessment of what the country will see with the impacts of on-again, off-again tariffs.
'Externalities, or these shocks to the market, whether they're acts of God or acts of man — COVID, earthquakes, wars etc. — these things happen on occasion,' he said. 'They're not forecastable, necessarily, although in this particular case a lot of the volatility could properly be ascribed to the new administration. The uncertainty, specifically in this case, is really on essentially the president himself and his close advisors. And it's not necessarily the tariff program, but it's the process by which they're implementing it. I hesitate to call it trade policy, because that word 'policy' lends a degree of credibility or validity to it, which it doesn't seem to have. It seems a little more capricious at times.'
Weiss said in his 40 years in the investment world, he's never seen the Federal Reserve Board of Governors use the term 'placeholder' in their minutes.
'The Fed Governors issue forecasts as part of their job for the economy, inflation, etc.,' Weiss said. 'Several of the Fed governors used the word or term — we're going to issue a 'placeholder' for GDP (Gross Domestic Product) growth — because even they have no idea which way this thing is going. So where do we land? We have an 85% probability right now of a slowdown or a recession. We've lumped them all together, so it's not necessarily a recession but clearly an economic slowdown. I think you're seeing that already in the numbers.'
It's the uncertainty that makes it hard to forecast. Even United Airlines, Weiss said, came out and said it was issuing two forecasts, something rarely seen.
'Which is a place a lot of us are at because it's so dependent on the magnitude and duration of the tariff program, and whether that indeed pushes us into a full-blown trade war with China or even some of our other allies,' he said.
Right now, many forecasters are predicting a recession, a prolonged economic decline.
It's difficult to give general advice in the current situation, but there are a couple of good rules to follow, said Weiss and Evan Mayhew, vice president, national accounts. Mayhew manages the Kansas 529 Plan.
Understanding your own tolerance for risk is important, and then diversification of stocks, bonds and other assets mean that if the market moves down in one of those areas, other investments can stabilize accounts, both said. Weiss said to consider geographical diversification, as some international markets are stronger than the U.S. market right now.
The Kansas 529 Plan, which is an investment tool to save for children's college education, has become more flexible over the years, allowing investors to choose their level of risk, among other things, Mayhew said.
'Originally, they were set up just for college savings,' he said. 'Now there's the option for you to use it on K through 12, also for post secondary. There's a new provision that went into effect last year that allows unused funds to be rolled into a Roth IRA. So really, it's identifying what's the objective of those goals and then investing appropriately.'
If 529 participants are looking at using funds to pay for kindergarten through 12th-grade educational costs, they would probably be more conservative, Mayhew said, because of a close timeframe.
'If you've got a longer runway, then look at something potentially more aggressive that you're comfortable with,' he said. 'We have multiple investment options.'
During economic downturns in the past, Mayhew said most clients continue their automatic payments to their 529 accounts. They typically see only a slight pull-back that corresponds to market volatility.
'We're looking at reports on a weekly basis of investor behavior and actually over the last week, our purchases and new accounts are actually on par with last year,' he said.
Looking back at other economic downturns, such as in 2008, Mayhew said they tend to see more of a slowdown in lump-sum payments, rather than in automatic investments.
Weiss said there is a risk of 'abandonment' of accounts when the economy is down, meaning customers take their money out. Sometimes they do it voluntarily, but sometimes job losses and other economic factors contribute to that decision.
Whether investing in a 529 Plan, mutual funds or other vehicles, the market right now is impossible to predict, Weiss said.
'It's fraught with peril if you rush to sell or, on the other hand, buy on the dips because you could potentially catch a falling knife, as they say, by doing that,' he said. 'Examine your overall asset allocation, making sure it's still roughly in line with your specific long-term goals and objectives. These are the tried and true principles of investing. We're not knee-jerk reacting to daily movements.'
Risk, Weiss said, is not something to consider after the markets are in a fall.
'Risk is not something you react to after the fact,' he said. 'It's something you should address up front before you ever make your first investment to make sure that you can, for example, tolerate a 20, 30, 40% loss in stocks in the short term.'