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Why uncertainty makes the stock market go haywire

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Traders on the floor of the New York Stock Exchange on March 14, 2025, at the opening bell. 

Timothy A. Clary | Afp | Getty Images

Uncertainty isn’t in short supply these days — and investors have taken notice.

See-sawing policy from the White House has given investors whiplash on many fronts — with tariffs being among the biggest question marks, market experts say.

Coupled with uncertainty around federal job cuts, negotiations to end the war in Ukraine and other issues, the combination has been “disorienting to market sentiment,” Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute, wrote Wednesday.

Stocks have wobbled amid the vertigo.

The S&P 500 entered a correction last week, meaning the U.S. stock index fell 10% from its recent high mark in February. The index has recovered a bit but teetered on the edge of a correction Tuesday afternoon.

The benchmark is down about 5% in 2025.

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Uncertainty makes investors jittery — and stock markets volatile — because they don’t know how policy and other events will impact companies’ ability to make money, said Barry Glassman, a certified financial planner and founder of Glassman Wealth Services.

Worried consumers might pull back on spending, crimping profits, for example. Tariffs raise costs for certain companies to import or produce goods — and it’s unclear how other nations might retaliate. While economists generally don’t think federal trade policy and job cuts will push the U.S. into recession, Trump hasn’t ruled out that possibility.

“All of this comes down to corporate profits,” said Glassman, a member of CNBC’s Advisor Council. “People will put more dollars where they have greater confidence in the investments,” he added.

Many ‘unanswered’ questions

There’s always uncertainty in the stock market, but it may feel more acute right now than at other times, experts said.

A recent (and perhaps counterintuitive) example of that uncertainty came on March 6, when President Donald Trump reversed course and delayed 25% tariffs on many imports from Canada and Mexico by a month. That delay came two days after the tariffs had taken effect.

Despite that “reprieve,” the S&P 500 sold off sharply during the day’s trading session, BeiChen Lin, senior investment strategist at Russell Investments, said recently.

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“There are still a lot of questions that remain unanswered,” Lin said.

For example, Lin said, what would happen after the 30-day delay? How might Mexico and Canada respond? Will the U.S. impose tariffs on other countries or products?

National Economic Council director Kevin Hassett warned Monday of “some uncertainty” over Trump’s tariff policy in coming weeks. Treasury Secretary Scott Bessent said last week that the Trump administration is more focused on long-term health of the U.S. economy instead of short-term volatility.

‘It’s all based on emotion’

Brad Klontz, a certified financial planner and behavioral finance expert, said he thinks the stock market turmoil ties into something more primitive than corporate profits: Human psychology.

“Quite frankly, it’s all based on emotion,” said Klontz, managing principal of YMW Advisors in Boulder, Colorado, and a member of CNBC’s Advisor Council.

“We like to feel like we can predict the future. When we feel the future is unpredictable, when we don’t have faith in our leaders, that’s when we start to panic,” Klontz said.

“There’s a ton of fear” right now, he added.

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Amid fear, it’s important for investors to put the recent market moves into perspective, advisors said.

A 10% pullback isn’t shocking after two consecutive years of annual stock returns exceeding 20%, Glassman said.

“This is normal,” Glassman said of the market’s temper tantrums.

However, investors often make bad financial choices by engaging in catastrophic thinking (believing the markets may never recover, for example), Klontz said. They buy high and sell low, he said.

Historically, the market has always bounced back higher.

“If you lost $40,000, you have to ask yourself, did you really lose it?” Klontz said. “If you didn’t sell, I’m not sure you lost it. If you sold, you guaranteed lost that $40,000.”

Focus on what you can control

During times of uncertainty, investors should focus on what they can control, Klontz said.

It’s a good time for investors to look at their asset allocation, and ensure their overall stock-bond holdings haven’t gotten too risky or conservative over time, for example, Klontz said.

The recent volatility has also shown the value of diversification among different asset classes in an investment portfolio, Glassman said.

For example, international stocks in both developed and emerging markets are up this year, even though U.S. stocks are down, Glassman said. Bond returns have also been positive, he said.

Ultimately, investor behavior is the biggest threat to stock returns, not the federal government, Klontz said.

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Personal Finance

Court order challenges Trump’s plan to move student loans to SBA

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People walk past the headquarters of the U.S. Small Business Administration in the Southwest Federal Center area on March 24, 2025 in Washington, DC. 

Chip Somodevilla | Getty Images

A federal judge’s recent order may foil President Donald Trump’s plans to transfer the country’s more than $1.6 trillion student loan portfolio from the U.S. Department of Education to the Small Business Administration.

U.S. District Judge Myong J. Joun wrote in his May 22 preliminary injunction that the Trump administration was required to reinstate over 1,300 Education Dept. employees and was blocked from carrying out Trump’s directive “to transfer management of federal student loans and special education functions out of the Department.”

In other words, federal student loans will stay with the Department of Education, for now.

Trump had announced on March 21 a plan to transfer over 40 million student loan accounts to the SBA.

“They’re all set for it,” the president said of the SBA at the time. “They’re waiting for it.”

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Madi Biedermann, deputy assistant secretary for communications at the Education Department, slammed the judge’s decision.

“Once again, a far-left Judge has dramatically overstepped his authority, based on a complaint from biased plaintiffs, and issued an injunction against the obviously lawful efforts to make the Department of Education more efficient and functional for the American people,” Biedermann wrote in a statement to CNBC on Thursday.

The Trump administration requested the order be stayed pending an appeal of the decision.

Transfer would have ‘increased confusion’

The development that student loans will remain in the Education Dept. for now is good news for borrowers, said Sarah Sattelmeyer, a project director at New America and senior advisor under the Biden administration.

“Instead of increasing efficiency, the movement of the Department’s core functions would have increased confusion and decreased the effectiveness of programs that students depend on to access education,” Sattelmeyer said.

Consumer advocates are worried that a mass transfer of accounts between federal agencies could trigger errors, or compromise federal student loan borrowers’ privacy. Those problems have occurred during much smaller transfers between loan servicers.

Advocates also raise concerns about how a change in agency might affect borrower protections and programs such as Public Service Loan Forgiveness.

The Small Business Administration has no experience relevant to the management of federal student loans, said higher education expert Mark Kantrowitz.  

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Personal Finance

How to pay college tuition bills with your 529 plan

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Here are the options for college savings in a volatile market

Largely due to President Donald Trump‘s changing tariff policies, markets have been on a rollercoaster ride since April. Although the S&P 500 has largely rebounded from last month’s lows, some families who have been diligently saving for future college costs may still see their 529 college savings plan balance hasn’t fully recovered.

For those with tuition bills now coming due, there are a few key considerations before tapping those accounts.

“With a little planning, making withdrawals can be something to celebrate, not just something to fear,” said Smitha Walling, Head of Vanguard’s Education Savings Group.

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Managing 529 allocations in a volatile market

For parents worried about their 529 account’s recent performance, Mary Morris, CEO of Commonwealth Savers, advises starting with a look at the asset allocation. “What you need to think about is assessing your risk appetite,” she said.

Generally, 529 plans offer age-based portfolios, which start off with more equity exposure early on in a child’s life and then become more conservative as college nears. By the time high school graduation is around the corner, families likely have very little invested in stocks and more in investments like bonds and cash. That can help blunt their losses but also mute gains.

Pay attention to your fund’s approach toward shifting from stocks to bonds, Morris said.

“If you are in a total stock portfolio, you may not want that ride,” she said: “You don’t want to get seasick.”

If the market volatility is still too much to bear, consider adjusting your allocation.

“One strategy is to start de-risking a portion of their portfolio and reallocate a portion into cash equivalent, which will provide a protection of principle while also proving a competitive return and peace of mind,” said Richard Polimeni, head of education savings at ‎Merrill Lynch.

Still, financial experts strongly caution against shifting your entire 529 balance to cash. “The worst thing an investor can do in a down market is panic and sell investments prematurely and lock in losses,” Polimeni said.

Often that is the last resort. In the wake of the 2008 financial crisis, only 10% of investors liquidated their entire 529 accounts, and 20% switched to less risky assets, according to an earlier survey by higher education expert Mark Kantrowitz.

How to make a 529 withdrawal plan

Another option is to tap a federal student loan and take a qualified distribution from the 529 plan to pay off the debt down the road. However, if you’re thinking of taking out private student loans or a personal loan that starts incurring significant interest immediately, you may want to spend 529 funds first in that case, and defer that borrowing until later.

Once you have a withdrawal plan, you can — and should — keep contributing to your 529, experts say. Not only can you get a tax deduction or credit for contributions, but earnings will grow on a tax-advantaged basis, whether over 18 years or just a few.

“The major advantage is the tax-deferred growth, so the longer you are invested, the more tax-deferred growth you will have,” Polimeni said.

Benefits of a college savings account

Student loan matching funds

Despite those adjustments, some recent changes have helped make 529 plans even more worthwhile: As of 2024, families can roll over unused 529 funds to the account beneficiary’s Roth individual retirement account, without triggering income taxes or penalties, so long as they meet certain requirements.

Restrictions have also loosened to allow 529 plan funds to be used for continuing education classes, apprenticeship programs and student loan payments. For grandparents, there is also a new “loophole,” which allows them to fund a grandchild’s college without impacting that student’s financial aid eligibility.

529 plan popularity has soared

In part because of the new changes, more parents are utilizing a 529 college savings plan

In 2024, the number of 529 plan accounts increased to 17 million, up more than 3% percent from the year before, according to Investment Company Institute.

Total investments in 529s rose to $525 billion as of December, up 11% from a year earlier, while the average 529 plan account balance hit a record of $30,961, data from the College Savings Plans Network, a network of state-administered college savings programs, also showed.

The industry is coming off its best year ever in terms of new inflows,” said Polimeni.

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Personal Finance

How appealing property taxes can benefit new homeowners

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If you just bought a house, it may be a good time to check the accuracy of your property tax assessment, experts say. 

Your property tax assessment is the way officials determine the value of your property for tax purposes. Inaccuracies about your home that factor into that formula could mean that you’re overpaying.

If it’s inaccurate, you likely have most of the essential documents you need to appeal, as part of your recent home purchase, according to Sal Cataldo, a real estate lawyer and partner at O’Doherty & Cataldo in Sayville, New York. 

The title report, for instance, is going to tell you the age of the house, Cataldo said. You might have a home inspection report on hand that details the property’s flaws, as well as an appraisal and your mortgage, which show the value of the house and the comparable value in the neighborhood. 

“You’ve gotten a wealth of information about your house, whether you realize it or not,” Cataldo said. 

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A home sale will typically trigger a property tax reassessment because the property is changing hands, with the new market value applied to the assessment. But the specific rules of when the new value is applied and the frequency of reassessments will depend on your area. 

Here’s why it may be valuable to add reviewing your property tax assessment to your to-do list as a newly minted homeowner:

Property taxes on the rise

In addition to your mortgage payment, home insurance and maintenance costs, property taxes are another factor to consider as you assess your housing expenses.

In recent years, property taxes have climbed because of rising home values and tax rates.

The median property tax bill in the U.S. in 2024 was $3,500, up 2.8% from $3,349 in 2023, according to an April report by Realtor. 

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How much you pay varies widely depending on where you live, and some areas see higher bills and price hikes.

As of 2023, the median property tax for homeowners in New York City was $9,937, LendingTree found in a recent report. The city ranks first among the metropolitan areas with the highest median property taxes. Rounding out the top three are San Jose, California and San Francisco, where homeowners paid a median $9,554 and $8,156, respectively.

Inaccuracies may be costing you

Success in the appeal can lead to savings for several years as the change becomes the basis for the next assessment, said Sepp. While some state or local governments reassess annually, others have less-frequent cycles with gaps of several years. Some have no set schedule at all.

Over 40% of homeowners across the U.S. could potentially save $100 or more per year by protesting their assessment value, with median savings of $539 a year, per Realtor.com estimates.

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