Hoooooooooooooooooooooo boy! Where do I begin?

I hope everyone’s doing okay…

Just when we thought we’d seen it all with the pandemic crash, here we are again watching our portfolios take another wild ride.

I thought that COVID-19 was going to be the last time a global event caused markets to tank so quickly that I needed to provide real-time commentary on a market crash… Boy was I wrong.

In this post, I’ll walk you through what happened with the “Trump Tariffs,” how I managed my portfolio through it, and most importantly, what you can learn from my experience (including my mistakes).

Table of Contents

• The Setup: My Warning from January
• U.S. Against the World
• Market Impact
• My Investment Decisions (So Far)
  • Reducing Risk: Reducing U.S. Concentration
  • Further Cutting Risk: Reducing Leverage
  • Re-Enter the Market (Sub-optimally)
• What I’ve Been Investing In
• Where My Portfolio Is Now
• My Plan Going Forward
• Conclusion

The Setup: My Warning from January

Interestingly, it wasn’t that long ago when I wrote this prophetic little gem in my 2024 year end post:

As the stock market has been in the incline since late 2022, it’s been about 2 years worth of massive growth of the S&P500. This has resulted in the S&P500 reaching a cyclically adjusted price-to-earnings ratio (aka CAPE or Shiller PE ratio) of 37.49 – the highest it’s ever been since the Dot Com bubble and the post-Covid bubble at the end of 2021.

It is often used to determine whether the stock market is overvalued or undervalued compared to other times in the past. And in the past, when the Shiller PE has reached this level, there’s often a correction or a crash that follows.

FIRE-Path Lion, 1 January 2025

Little did I know how soon that correction would actually follow – let alone it being caused ON PURPOSE BY THE PRESIDENT OF THE UNITED STATES HIMSELF no less.

So what the **** happened?

U.S. Against the World: What Happened

As most of us know by now, Donald Trump and his administration ran for the presidency on the “Make America Great Again” platform. His economic vision centered around the idea that America needed to get “better deals” with its trading partners.

The core argument was that America had been taken advantage of through unfair trade agreements, with Trump positioning himself as the only person who could fix these problems and restore America to its former glory.

He’s going to stop other countries from taking advantage of the U.S. and give it what is fair in trade deals – and pay the U.S. what it’s due from all the protection it offers the world.

So with that rhetoric and expectation, Trump has set his administration up to be the most isolationist and protectionist since 1929, threatening to throw away all of the influence and soft power that America has built up over decades.

The Escalation of Trade Tensions

Trump’s protectionist stance began escalating rapidly after his inauguration:

1. January 2025: Trump began talking about annexing Greenland and making Canada the “51st State” (rhetoric that caused immediate diplomatic tensions)
2. February 2025: The administration announced initial tariffs on Canada and Mexico – two of America’s closest allies and largest trading partners
3. March 2025: The EU became the next target with threatened tariffs on European imports
4. April 2, 2025 (“Liberation Day”): Trump announced sweeping tariffs on approximately 90 countries worldwide with seemingly arbitrary rates not based on economic principles

Even Singapore, which has a trade deficit with the U.S. (meaning Singapore imports more from the U.S. than it exports there), was hit with a 10% tariff.

Note: If Trump’s formula was truly about “fairness,” then following his own logic, America should be paying Singapore since America exports more to Singapore than it imports. This inconsistency showed that it was not about fairness at all.

Global Response and Market Reaction

This move was so unprecedented and so counter global – and especially American – interests that the market began tanking immediately.

This unprecedented move contradicted decades of global trade policy and American economic interests, causing markets to tank immediately and severely:

• The S&P 500 dropped more than 9% in 2 days and over 11% in 4 days.
• The tech-heavy Nasdaq plunged more than 10% in 2 days and more than 12% in 4 days.
• Global markets followed suit with similar declines.

This seem to signal the end of an era for global free trade and economic prosperity.

The situation was serious enough that PM Lawrence Wong addressed Singapore in a national broadcast to unite the nation and mentally prepare us for a future of economic pain and uncertainty.

Recent Developments

Since the initial announcement, there have been some adjustments:

• Trump instituted a 90-day pause on tariffs above 10% for most countries
• China was excluded from this pause and retaliated with their own tariffs
• The two economic superpowers are locked in an escalating trade conflict

How this situation resolves itself remains uncertain, but one thing is clear: global trade patterns are being fundamentally disrupted. And as you might expect, this hasn’t been good for investors…

Market Impact

It’s probably not an exaggeration to say that the market handled this as well as a drug addict going through withdrawal.

While the stock market has entered 2025 extremely strong and remained surprisingly lofty up until the peak on the 19th of February (it seems most market participants were still expecting rationality and sane economic and international relations policy to prevail), the market started its decline as Trump’s anti-Canada and anti-Mexico rhetoric continued to escalate towards the March 4th tariff deadline.

My Investment Decisions (So Far)

Decision #1: Reducing U.S. Market Concentration

As I mentioned at the beginning of this post, I was already concerned about the U.S. market’s high valuation (Shiller CAPE ratio of 37.49) when we entered 2025. This led me to my first defensive move: reducing my portfolio’s exposure to U.S. stocks.

My Initial Risk Reduction Steps:

• Shifted more assets from U.S.-focused funds to globally diversified indexes
• Increased allocation to VWRA (Vanguard FTSE All-World UCITS ETF)
• Reduced position in U.S.-specific holdings

While these adjustments helped, they weren’t enough. As February progressed, Trump’s rhetoric against Canada and Mexico intensified, and when I saw that he was actually serious about implementing tariffs (with markets already beginning to slide), I realized I needed to take more significant defensive action.

The market was sending clear warning signals, and my internal alarm bells were ringing. This wasn’t just normal political posturing – the administration appeared to be genuinely pursuing policies that defied economic logic.

Decision #2: Further Cutting Risk: Reducing Leverage

My leverage situation at the start of the year

As most of you guys know by now, I’ve been experimenting with leverage for the last several years – and it has done quite well for me. It is a high risk and high reward strategy, increasing my returns as the market goes up, however it would also multiply my losses on the way down.

Read up on my leverage journey from previous posts:

• Gambling my house on the stock market: Cash-Out Refinance to Invest – Why I Did It
• House gamble – Update 1
• House gamble – Update 2
• Lifecycle Investing & House gamble – Update 3
• Lifecycle Investing Update 1 & House gamble – Update 4
• House gamble – Update 5 (House Sold)
• 2023: Leverage Contribution
• 2024H1: Portfolio & Leverage Position
• 2024: Portfolio Including Leverage

At the start of the year, I was maintaining a 1.5x leverage ratio. At that leverage ratio, for every 1% my asset price increases, my portfolio will increase by 1.5%, but if the price drops by 1%, my portfolio value will also drop by 1.5% – 1.5x on both the up and the down side.

At the same time, I am also very aware that for this strategy to work, I must be able to survive in the long term. Risk management is paramount.

I wanted to ensure I minimise the chance that I will be forced to sell when the market is down. So I’ve always tried to keep my crash buffer above 50%. This means I could at the very least withstand a 50% market crash before being margin called.

In normal times, I would be quite comfortable with my risk at this level. As long as I know we have rational leadership at the helm – someone that’s at the very least a rational and logical actor that is looking to maximise economic prosperity – even if I didn’t ideologically agree with their approach.

However, this does not seem true for the Trump Administration. They seemed to be neither competent nor rational – making the future trajectory impossible to predict.

Deleveraging: Risk vs Reward – Maximising the ability to sleep at night

As the uncertainty increased, I seriously considered whether I should maintain my leverage ratio or sell my holdings to cut down my leverage and increase my crash buffer in the process.

I am embarrassed to say that the choice was not as easy for me to make as I would have liked to make you believe. As much as I’d like to think I’m a completely rational thinker, greed almost got the best of me.

While it was becoming clear that Trump was more likely than not to destroy international trade, I still felt unsure about going ahead with reducing my leveraged position.

On one hand, if I sold and the market goes up instead, I’d lose out on some potential gains – something I’d probably feel regret about in hindsight.

This thought of “what if the market goes up?” was holding me back from going through with selling… that is until I thought about the opposite scenario.

I asked myself, what if instead I did not sell and the market went down? Which would I regret more? Which would keep me up at night?

With this lens, the answer was much clearer – I definitely need to reduce my leverage.

So that’s what I started doing, in 2 large blocks:

1. 26-Feb-2025: Sold 2418 shares of VWRA at USD 143.54 per share for ~SGD 463,000
2. 3-Mar-2025: Sold 4550 shares of IWDA at USD 110.92 per share for ~SGD 680,000
3. 3-Mar-2025: Bought 1534 shares of VWRA at USD 143.34 per share for ~SGD 298,000

The last 2 transactions effectively means I sold about 380,000 of IWDA to cover leverage, but swapped about SGD 300,000 of IWDA for SGD 300,000 of VWRA instead for further diversification.

Before I reduced my leverage, my total leverage amount was sitting at roughly SGD 1.4M. After this move, I reduced my total leverage down to about SGD 530,000 – a 60% reduction of my leverage. At that point, my crash buffer increased to more than 80%, extremely safe.

Additional thoughts on deleveraging

The thought of completely selling my entire portfolio to go to cash was never a serious consideration as I still believed in the long term positive returns of the stock market, plus I also believe I can never time the market perfectly. This was also apparent in the fact that I didn’t sell out of my leverage completely, and instead kept about 40% of it still invested in case the market went up instead.

On the other hand, deleveraging ensured that even if the market dropped, I would still have more than 50% crash buffer rather than be stuck at 40% or 30% or even lower crash buffer – which would probably make me start sweating even though I was quite confident in a positive long-term outcome. I decided that it’s better to err on the side of caution and being able to live to fight another day.

This turned out to be a very prescient call – getting me out of the market way before the major drops that were to come.

While I would like to give myself a pat on the back for getting out at almost precisely the right moment, I’d like to also highlight that good market timing requires being right twice: first, when to get out… and second, when to get back in.

Let’s discuss that next.

Decision #3: Re-Enter the Market (Sub-optimally) – FOMO Kicks In

Now that I was sitting on more than 80% crash buffer and lower risk, you’d assume I’d comfortably sit out and wait for a crash that’s yet to come, yes? Far from it.

As the market started dropping from when I sold, I started thinking “Oh! This is the drop! Buying opportunity!” and every market drop looked like it could be a great opportunity to buy in.

Since I believe I cannot predict or time the market completely, I was never sure whether this drop was going to be the furthest the market will drop so I started buying back in even before the “Liberation Day.”

By the time Liberation Day came on the 2nd April, I was already back up to SGD 953,000 in leveraged position, an increase of SGD 423,000 in leverage within just a month. This is all before the big drop that happened on the 7th of April.

As of right now, I’m back to 1.5x leverage and 50% crash buffer again.

Here’s a visualisation of when I sold (red) and when I “averaged back in” (green):

So in hindsight, I had pretty good timing on deleveraging, but had pretty terrible timing on getting back in. I was way too early, but why?

Why I Caught the Falling Knife: My Psychological Reasoning

Looking back, I should have waited at least until Liberation Day (April 2nd) before buying back in. So why didn’t I? Here’s my honest assessment of my decision-making process:

The Uncertainty Factors:

1. Policy Uncertainty – Trump had a history of making big threats then backing down. I thought: “What if he’s just bluffing and doesn’t actually implement tariffs? I’ll miss the relief rally.”
2. Administrative Uncertainty – I hoped that even if Trump wanted extreme measures, his economic advisors would moderate his position. (Spoiler: I overestimated their influence or willingness to provide sound advice.)
3. Implementation Uncertainty – Even after the tariffs were announced, I wasn’t sure they’d actually be enforced as stated.
4. Duration Uncertainty – I thought the tariffs might be quickly reversed once their economic damage became apparent. (This did partially happen with the 90-day pause announced soon after implementation.)
5. Psychological Safety Net – I kept telling myself: “As long as I’m buying at lower prices than where I sold and maintaining my crash buffer, I’m still ahead of where I’d be if I hadn’t sold at all.”

The combination of these factors created a powerful psychological pull to start buying back in too early. It’s a classic example of how even when you know better intellectually, emotions and cognitive biases can affect your investment decisions.

So with all of the uncertainty I laid out above as well as the last point, it made sense for me to keep adding to my leverage position as the market went down.

This had worked out well for me in the past crashes. Even if I don’t catch the absolute bottom, I am still buying in on the way down, and once the market recovers – and it will recover – I’ll be in a very strong position even if I do not perfectly catch the bottom.

Though, while I think the market will recover at some point, I also think that it’s more important now than ever to ensure you are well diversified.

What I have been investing in

Given the Trump Administration has gone completely off the rails, I do see a lot of risk in having an investment portfolio that is purely invested in the U.S.

Do I believe that this is going to be the end of the United States? Probably not.

Do I believe that this gives the rest of the world strong reason to protect themselves from giving America as much power as it has? Absolutely.

Do I believe that this will permanently diminish America’s standing in the world? Of course.

Do I believe that this will change global trade forever? Yes.

So whatever the impact is and when the impact presents itself, it will not be positive for the U.S. as the world looks for ways to mitigate against these types of risks in the future.

I’m not about to count the U.S. out from being able to make a come-back, but I also won’t bet purely on them either.

Having said that, do I still believe that broad market index funds will still represent the trajectory of human progress and that it would continue to go up in the long term? Also absolutely yes!

Remember, we’ve seen a mini version of this before in 2018, when Trump started his trade war on China. VWRA has almost doubled since then.

Therefore, fortunately, this doesn’t change my overall strategy – I’ve always had global exposure through IWDA and VWRA, and this episode has shown that this has been the right path. In fact, I lean more towards VWRA now than before – which is why I’ve decided to sell down my IWDA position to switch over to more VWRA.

Buying the entire world’s basket of stocks continues to be the approach I have high conviction in.

Where My Portfolio Is Now

Due to my good luck in timing the deleveraging, my portfolio was not hit as hard as it could have been. However, as I also bought back in quite aggressively on the way down, my portfolio has dropped from it’s peak of SGD 2,747,000 in 2-Feb-2025 to just SGD 2,427,000 today- a drop of about SGD 320,000 in less than 2 months.

At the very bottom of the drop on 9th of April, my portfolio sat at about SGD 2,155,000 – a SGD 592,000 drop. Phew!

Here’s a beautiful chart:

My Plan Going Forward

So now that I’ve already leveraged back up to 1.5x and 50% crash buffer, there isn’t really any “dry powder” left to average down if the market continues to drop from here.

The silver lining – if there is any – is that the market has already dropped by about 10% from the high, so the risk of another 50% drop from here is much lower than before.

While I wished that I had waited a little while longer before starting to buy back in – so I can better catch the bottom, at least I can sleep easier at night now.

At this point, if the market continues to fall, I will drop below my 50% crash buffer, so I won’t be able to add leverage as market drops. However, I will continue to buy into the market as my salary comes in. This will then have the effect of both adding to my portfolio as the market goes down and since this is new money, it will also help pad my crash buffer at the same time. This should mean as long as I keep my day job, the risk of hitting a margin call due to continued market drop should be quite low.

Had I not sold when I did, I would probably be sweating bullets now.

Alternatively, if the market moves up from here, then I’m in the position to capture the upward movement. I will continue adding both new cash and leverage to maintain the 1.5x leverage and 50% crash buffer on the way up.

All of this will likely be completely through VWRA – staying the course, as usual.

Conclusion: Lessons From My Trump Tariff Experience

While the current market situation is unprecedented, my experience has reinforced my core investing philosophy: stay the course with a well-diversified global portfolio for long-term success.

Key Takeaways for Fellow Investors

1. Market timing is a two-part challenge – I got the first part (selling) almost perfectly right, but still messed up the second part (buying back in). This proves how incredibly difficult successful market timing truly is.
2. Global diversification is no longer optional – The events of 2025 demonstrate that even the U.S. market isn’t immune to serious political risk. A globally diversified portfolio provides essential protection against country-specific problems.
3. Risk management saved me – Having that 50% crash buffer prevented a potential disaster. Without proper risk management, leverage can be devastating during market crashes.
4. The “sleep well at night” factor matters – Sometimes the mathematically optimal investment decision isn’t the right one for your mental wellbeing. An investment strategy you can actually stick with is better than a “perfect” one you’ll abandon in a crisis.
5. For most investors, doing nothing is the best strategy – If you have emergency funds, a long-term horizon, and a diversified portfolio, simply staying the course is likely the best strategy. Unlike my leverage situation which required more active risk management, most investors are better off continuing their regular investments regardless of market movements. Well-designed investment plans are built to weather exactly these kinds of storms.
6. Long-term, humanity moves forward – Despite periodic setbacks, trade wars, and political chaos, human innovation and progress continue. This fundamental truth is why index investing works over decades.

I am very confident that, as with all past crashes – Dot Com, Great Financial Crisis, 2018 Trade War, COVID-19, and 2022 Quantitative Tightening – we will all look back at this as a tiny blip in 10-20 years.

Your Turn

How are you handling the current market situation? Have you made any adjustments to your investment strategy in response to these global trade disruptions? Are you sticking with your long-term plan or making tactical adjustments?

I’d love to hear your thoughts and experiences in the comments below!

Until next time!
FPL