The case for owning stocks at every age, plus what the Street means by 'risk off'

CNBC

10-05-2025

Here's our Club Mailbag email [e-mail] — so you send your questions directly to Jim Cramer and his team of analysts. We can't offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week's first question: I retired a few years ago, sold my business. Should I be in the market? Or is there another place you would suggest? — Jack If you are recently retired or near retirement, it can be tempting to reallocate funds out of the stock market — especially in during volatile times. But pulling out entirely may not be the answer. "Sure, you can get out but can you get back in," Jim Cramer said in a recent Mad Money episode , noting that most investors miss some of the upside recovery before returning to the market. That's because recoveries can be confusing. They don't come with clear signs and usually start as bear market rallies. "We want to be in for the seven days each year that are really unbelievable," Cramer said during the April Monthly Meeting , noting that the market's annual gain usually comes down to a handful of sessions. The truth is the market doesn't move in a straight line. Some days make you wish you were heavier in cash, while others make you want to own more stocks. But trying to time that balance perfectly – jumping in and out – rarely works. That's why Jim recommends staying the course. "If you stayed the course in good stocks, you never had to worry about getting back in and you made a huge amount of money," he said. At the same time, it's crucial to tailor a strategy to your personal situation. You do this by knowing your risk tolerance, liquidity needs, and how much cash you want available. Generally speaking, if you're in retirement but still have a multi-decade time horizon and can stomach some volatility, there's little reason not to have exposure to the market. In fact, downturns can offer opportunities to buy great companies at a discount. As Jim often says, investing is an art, not a science. We use tools like the S & P 500 Short Range Oscillator to help guide decisions on when to raise or deploy cash. But the core principles of maintaining discipline while reviewing your portfolio regularly and being ready to take advantage of long-term opportunities remain as our north star in staying in the market during tough times. This week's second question: I keep hearing analysts talking about "risk on" and "risk off." Can you explain what this means and how it would relate to stocks in the Investing Club portfolio? — Reneta, Ithaca, NY When analysts talk about a "risk on" or "risk off" environment, they're describing investor sentiment. In a risk-on environment, investors are feeling optimistic, often because of strong economic data or solid corporate earnings. Stocks tend to rally as people are more willing to make bigger bets on higher-risk assets like stocks, which offer the potential for greater returns. Since markets are forward looking, this bullish sentiment reflects expectations of continued growth. Conversely, a risk-off environment is driven by uncertainty or fear, like concerns about a slowing economy, geopolitical tensions, or a weak labor market. That fear fuels market volatility and prompts investors to rotate out of riskier assets like tech stocks and into safer plays such as cash, bonds, or defensive stock sectors like consumer staples and utilities. In risk-off mode, the market may look bearish, and the focus shifts from trying to grow capital to preserving it. We've seen a clear risk-off tone in recent months. Investors have been pulling back from U.S. stocks amid unpredictable and aggressive tariff policies from President Donald Trump. His tense trade negotiations with China — a country that accounts for over 16% of total U.S. goods imports — have raised alarm bells over global trade, economic growth and corporate profits. Higher tariffs on Chinese imports into the U.S. could raise consumer prices and slow spending, which could in turn tip the U.S. into a recession. That caution is showing up in CEO sentiment, too. An April survey found more than 60% of the U.S.'s top executives expect a recession in the next six months. "I feel we're in a risk-off market on an intermediate term basis," said DoubleLine Capital CEO Jeffrey Gundlach in a CNBC interview Wednesday following the Fed's policy decision to keep rates steady. "We are in, sort of, unchartered waters," he continued. "We don't know what tariffs are going to do to inflation and there is pressure, a little bit, on rising unemployment." Market volatility is reflecting that fear. The VIX – Wall Street's fear gauge – spiked to a high close of 54.33 on Apr. 8, more than double its long-term average of about 20, after Trump unveiled surprisingly aggressive country-specific tariffs. The S & P 500 dropped nearly 11% in just two days , and the CNBC Magnificent 7 Index plunged about 14% in that same stretch, which put it down over 27% from its January high. The index has recovered almost all of those losses, rebounding more than 13%, as of Friday afternoon, after an upbeat first-quarter earnings season. As stocks have bounced back, the VIX also has retreated substantially and traded around 22.5 on Friday. Notably, however, 89% of S & P 500 companies have discussed tariffs on earnings calls this quarter, suggesting they are still a concern. This market anxiety has provoked investors to hedge and seek refuge in "risk-off" safe havens assets like gold, which set a new all-time high of $3,500 per ounce on April 22. As of Friday, gold traded less than 5% below that late April peak. At the Investing Club, we tend to think of risk-off as buying defensive sectors like consumer staples, health care or utilities, which tend to exhibit low volatility in different phases of the economic cycle. Investors tend to also prefer assets perceived to be safe havens like bonds and gold. This also means staying away from high multiple stocks, particularly in the tech sector, or, as Director of Portfolio Analysis Jeff Marks puts it, "anything super-fast growing" since they tend to show weakness in an uncertain environment. Jim Cramer, however, cautions against investing purely based on the risk-on or risk-off mindset. He said trying to time those shifts can backfire (see first question above). "The derivation of the terms 'risk on' and 'risk off' has more to do with what big-time hedge fund managers are thinking about — cash, short or long S & P futures — than what we are doing, which is attempting to make money via individual stocks no matter the market," Jim wrote in a Sunday think piece in March. "You are not going to get a Sunday email from me saying, 'I can't figure it out so it is risk off.' To me, risk off means, 'What the hell do I know?'" Instead, Jim and Jeff focus on investing best-of=breed companies that have great management, and solid long-term growth at reasonable valuations. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. Traders works on the floor of the New York Stock Exchange (NYSE) at the opening bell on April 8, 2025, in New York City.
Here's our Club Mailbag email [e-mail] — so you send your questions directly to Jim Cramer and his team of analysts. We can't offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries.