Similar to today, the Roaring 1920s saw rapid technological change with cars and electricity. This created a farm surplus as fewer horses consumed less feed. Prices fell, and farmers complained of foreign competition.
Herbert Hoover promised higher tariffs in his 1928 presidential campaign. He won, and the House passed a tariff bill in May 1929. The Senate was still debating its version of the bill when the stock market crashed in October 1929. Today, we use that event to mark the Great Depression’s beginning, but at the time, people didn’t know they were in a depression or even a recession. Most economists expected a quick recovery. Stocks did recover quite a bit in the following months, though not back to their prior highs.
When the Senate finally passed a tariff bill in March 1930, the thinking was not that different from what we see today. They thought they could preserve and even extend the good times. But conditions quickly worsened, and by 1931, unemployed men were standing in soup lines. In 1932, both Smoot and Hawley lost their seats as Franklin Roosevelt beat Hoover in a landslide—57% of the popular vote. The dust bowl to follow in the 1930s brought severe dust storms that killed off livestock and crops, which only made the economy that much worse.
That history won’t necessarily repeat this time, but it’s worth noting as we venture into the continued tariff talks with China. No one can predict what will happen, or when, even using history as a guide. Instead, these are times to make sure that your financial plan is in place, and your retirement income is accounted for when we enter tougher times in the markets. Do you have an emergency fund of cash and bonds to use if stocks go down? If you have to sell your stocks in a down market, this could impact your exposure to a recovery when stocks move back up.
In Chapter 7 of Your Insiders’ Guide To Retirement, titled ‘Make Your Plan Adaptable’, we talk about how goals are what make your personal plan unique, and how they should be the focal point of your plan. The rationale is that most markets recover, given time. As a result, plans recover and function just fine. However, a good plan will also have the ability to make mid-course adjustments after reviewing your holdings, asset allocation, risk, and expenses.
Financial planning is a part of building the life you want. You can design the best years of your life and do the things you want to do when you build a plan with priorities and expense ranges. You’ll be prepared for anything that life throws at you, including tariff tweets!
