Author: Vawn Himmelsbach

Mortgage rates are climbing in response to a sell-off off in U.S. Treasury bonds, according to CNBC.

Throw in an accelerated mortgage sell-off in China and things could get much worse. Mortgage rates tend to track the 10-year Treasury yield, so it doesn’t bode well for mortgages if investors decide to sell U.S. Treasury bonds.

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Adding to the risk is the possibility that U.S. mortgage-backed securities (MBS), 15% of which are held by foreign countries, could also be increasingly on the selling block

“If China wanted to hit us hard, they could unload Treasuries. Is that a threat? Sure it is,” Guy Cecala, executive chair of Inside Mortgage Finance, told CNBC.

At the time of writing, President Donald Trump had imposed tariffs of 145% on Chinese goods, while China retaliated with tariffs of 125% on imported American goods.

If countries like China decide to dump U.S. Treasuries and MBS in retaliation for tariffs and trade policies, how could that impact you?

Why this matters

Treasury securities are bonds issued and backed by the U.S. federal government, while mortgage-backed securities (MBS) contain pools of mortgages.

Foreign countries own $1.32 trillion of U.S. mortgage-backed securities, according to a global markets analysis from Ginnie Mae. China is one of the largest holders of agency mortgage-backed securities, along with Japan, Taiwan and Canada.

If Chinese institutions started selling off MBS — and if other countries start following suit — it could ripple through global financial markets.

Some doubt it will happen. This would “damage China’s own financial interests by devaluing its remaining holdings and destabilizing global currency markets,” Melissa Cohn, regional vice-president of William Raveis Mortgage, told Newsweek.

It’s generally thought to be in China’s best interest that the country keep its currency, the renminbi (RMB), lower than the U.S. dollar, since — as a nation dependent on exports — it wants to keep its prices competitive. Thus, by purchasing U.S. debt, China maintains the balance according to which Americans can continue to buy more Chinese products.

Still, an escalating trade war has raised uncertainty — and a sell-off isn’t off the table if China is willing to absorb losses. China had already begun selling off some of its U.S. MBS last year and there’s speculation it’s continuing to do so.

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What does this mean for US homebuyers?

MBS investors influence mortgage rates, based on what they’re willing to pay for mortgage-backed securities. Accelerating a sell-off would translate into lower prices for the bonds and, thus, higher mortgage rates for Americans, especially those with variable-rate mortgages.

“Most investors are concerned that mortgage spreads would widen in response to either China, Japan or Canada coming in with a retaliatory objective,” Eric Hagen, mortgage and specialty finance analyst at BTIG, told CNBC.

For those unlucky homeowners, even refinancing could leave them with higher payments. At any rate, refinancing would be less attractive, since rising rates could negate any potential savings. The 30-year fixed mortgage rate (as of April 17) averaged 6.83%, according to Freddie Mac.

Some buyers could also be priced out of the market. Higher mortgage rates can lead to a reduction in demand and, in turn, lower housing prices, so sellers may be tempted to stay put until the market improves.

Since higher rates lead to higher monthly payments — and a higher debt-to-income ratio for borrowers — this scenario can also lead to a tightening of lending standards. To mitigate risk, lenders may increase credit score requirements or require larger down payments.

If you’re looking to buy a home, secure a mortgage pre-approval so you have a budget to work with (though a pre-approval isn’t a guarantee). If you can get a good rate now, you may want to lock it in. If you’re a first-time homebuyer, you might be able to apply for an FHA loan, which is guaranteed by the Federal Housing Administration.

If demand stalls, sellers may want to consider lowering the asking price or offering incentives (such as covering the buyer’s closing costs) to sweeten the pot.

On the other hand, amid economic turmoil and plummeting consumer confidence, buyers and sellers may simply choose to wait it out.

In the meantime, it’s a good idea to build up your emergency fund to help cover higher costs if necessary.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

For Detroit native Nicole Brewer, moving to Oman was never on her radar. She had been teaching English as a second language in South Korea for three years, but by 2012 was ready for a change.

While looking for jobs in the Middle East, her first thought was Dubai.

“Because, you know, obviously everybody knows the [United Arab Emirates],” she told CNBC Make It.

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But then she came across a posting for a teaching job in Nizwa — an ancient city in Oman — and was struck by its beauty. After doing some research, she decided to try it out, and she’s been there ever since.

Now 43, she says she’s “very, very grateful to be in Oman” and doesn’t plan to ever move back to the U.S.

“Being in Oman, I’m very relaxed. I don’t have as much stress when it comes to the everyday expenses of living in this region,” she tells CNBC.

Life in Oman: The pros and cons

Brewer isn’t Muslim, nor does she speak Arabic. The culture is conservative compared to American standards. But Nizwa also has a laid-back vibe and a low crime rate.

“Honestly, it’s not for everybody,” she tells CNBC. But she describes herself as a go-with-the-flow type of person, “and as long as you respect the culture, it’s definitely a nice life.”

Brewer can also live well, on less money, by embracing a simpler lifestyle. She earns $40,000 a year at her job (and another $4,000 from some side gigs), which may not seem like much — at least by American standards.

However, she pays just $650 a month for a furnished two-bedroom apartment, including utilities, and it’s just a short walk to work. And she has enough money to go out for dinner with her circle of expat friends on a regular basis.

Since the cost of living is so low, she’s able to save money, which allows her to travel on summer and winter breaks. So far, she’s travelled to Namibia, Seychelles and Bali. She’s also planning to eventually retire in Portugal. Plus, she no longer worries about overspending, which has reduced her stress levels.

But it’s not just about money. Brewer tells CNBC that she doesn’t face some of the challenges that she did as a Black woman living in America. In Oman, she doesn’t deal with “much or any racism.”

Rather, she says she has “passport privilege” because “people here have respect for Americans,” and she’s treated warmly by locals — especially when they find out she’s a teacher.

Yet, living abroad does come with challenges — like being far away from friends and family. Plus, casual dating isn’t done in Omani culture, so her dating pool is limited to other expats.

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What you need to know before you go

The estimated monthly cost for a family of four in Oman is $2,596, excluding rent, while a single person can expect to pay an average of $747, excluding rent.

A one-bedroom apartment costs on average $532 in the city center or $361 outside the city center, according to data compiled by Numbeo. Compared to Detroit, the average rent in Nizwa is 84.1% less.

Brewer tells CNBC that she spent just $163 on dining out with friends in January. In Nizwa, a meal in an inexpensive restaurant averages just $2.60 while a three-course meal for two people in a mid-range restaurant averages about $26.

While the cost of living can be attractive, it’s also important to understand the social norms, local customs and societal structure of any country you want to move to. In this case, Oman adheres to Islamic traditions, and American women may find gender roles more restrictive (both socially and professionally).

For Americans who want to move to Oman, they’ll need a resident-sponsored visa or unsponsored visa. If you’re a sponsored worker, such as Brewer, you can get an employment visa, but you also have the option of a student visa, spouse visa, family joining visa or investor visa, among others. You can also apply for an unsponsored resident visa if you buy certain types of property.

While you’ll need to understand the tax obligations in your new home country, you’ll also still need to pay taxes to the IRS. You’ll want to avoid double taxation, so you may want to consider working with a tax professional with experience in assisting U.S. citizens abroad.

You’ll also need health insurance, so that’s another cost to factor in (many long-term visas require proof of health insurance). In Oman, for example, citizens receive free or low-cost health care, but expats are typically required to have private health insurance — plus, private hospitals are more likely to provide English-language services.

Working with an immigration lawyer in Oman, or wherever you hope to move, could help you navigate any hurdles.

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Construction costs started surging in anticipation of tariffs — and they could get worse with a baseline 10% tariff now in place on imported goods from most countries, not ot mention a sky-high tariff of 145% on most Chinese goods.

That all translates into higher costs for new condos and homes, even after the Trump Administration announced a 90-day pause for many previously unveiled "reciprocal" tariffs on countries other than China.

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“We’re seeing [subcontractors] throw an additional cushion into their numbers anticipating tariffs,” Related Group CEO Jon Paul Pérez told CNBC in March.

“It could be as much as 20%, depending on what material they’re getting from another country.”

The billionaire developer told CNBC that contractors bidding on seven of its projects are raising their prices, driven by the anticipation of higher costs.

A tariff on imported goods — in this case, construction supplies like softwood lumber sourced from Canada and gypsum (for drywall) sourced from Mexico, means higher costs that are either absorbed by builders or passed onto consumers.

How tariffs are impacting the construction industry

The cost of housing has been on the rise — and it’s not just because of tariffs. Supply chain issues have had a negative impact on the construction industry for several years.

“The cost of building materials has already risen by 34% since December 2020, which is far higher than the rate of inflation,” notes the National Association of Home Builders (NAHB). In a March survey, before reciprocal tariifs were even announced, it estimated that tariff actions could increase the price of a typical home by $9,200.

On April 2, President Donald Trump announced sweeping tariffs, including a baseline of 10% for all trading partners and 25% on all imported cars. The “reciprocal” tariffs he’d proposed for trading partners with large trade imbalances were later paused, for 90 days, with the exception of China.

There were no additional tariffs on Canada and Mexico, but tariffs of 25% remain on goods that aren’t covered by the Canada-United-States-Mexico Agreement (CUSMA).

Contractors reacted by raising their prices in anticipation of those tariffs.

“These tariffs are projected to raise the cost of imported construction materials by billions of dollars, depending on the specific rates,” warns NAHB, and some critical supplies could see dramatic increases that “could substantially impact builders’ ability to deliver new projects.”

Another factor to consider is the crackdown on immigration, which could have an inflationary effect on the construction industry — which relies heavily on foreign-born workers.

So, what can condo buyers do in today’s market? Here are 3 smart financial moves.

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1. Lock in financing early

Mortgage rates fluctuate for a number of reasons, from supply and demand to economic pressures (a downturn, for example, could result in lower rates to spur growth). The mortgage market also tends to follow movements in the Federal Reserve’s key borrowing rate.

If you’re worried that rates will rise between the time you make an offer and closing, an option is to lock in financing with a mortgage rate lock. This provides a fixed rate for a set period of time (typically between 30 to 60 days, but possibly longer). Some lenders will offer this for free, but others may charge a fee.

The flipside is if interest rates drop, then you’re stuck with the higher locked-in rate. Some lenders may offer a ‘float-down provision’ so you can secure the lower rate if it drops by a certain amount, but there’s usually a fee for this.

2. Explore new construction incentives

Another option is to consider buying a pre-construction condo, which means it’s still being built. Homebuilders may offer incentives to attract potential buyers and to persuade them to sign a contract — and it’s possible we could see more of these types of incentives if the market slows.

In 2022, for example, when the market rapidly slowed during the height of the COVID-19 pandemic, builders used sales incentives to boost sales and limit cancellations. According to NAHB, 59% of builders offered some kind of incentive, such as paying closing costs or fees, offering options or upgrades at low or no extra cost and offering mortgage rate buydowns.

If you’re looking at new construction, it’s always worth asking about incentives.

3. Consider alternative financing

You also have options beyond a traditional mortgage. For example, there are a number of government-backed loans available if you meet certain criteria. These include:

• FHA loans: Offered by certain banks, these loans usually require a smaller down payment than a traditional loan, and they’re insured by the Federal Housing Administration (FHA). If your credit score is preventing you from a traditional loan, this may be an option.
• VA loans: If you’re a vet, active-duty service member or eligible spouse, a VA loan can provide perks such as no down payment and no private mortgage insurance requirements.
• USDA loans: If you’re looking to buy a home in a rural area and you meet income requirements (for low to moderate-income homebuyers), a USDA loan may offer more competitive interest rates than a traditional rate and options for no down payment.

There’s also down payment assistance (DPA) programs offered by state and local governments, which are low-interest or deferred-payment loans to help first-time homeowners cover down payments.

Other options include owner financing (where you buy direct from the seller and pay the seller back in installments rather than going through a bank) and rent-to-own (where you rent the property before buying it at the end of the lease). These types of arrangements can be complex, so you’ll want to consult with a real estate attorney before proceeding.

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The U.S. is not in a recession — yet.

But with threats of high tariffs on U.S. imports, policy uncertainty, mass deportations and Department of Government Efficiency (DOGE) cuts, some economic observers believe the odds are rising.

“We’ve got a real uncertainty problem, it’s going to be hard to fix that,” former Treasury Secretary Lawrence Summers said in an interview on Bloomberg Television’s Wall Street Week with David Westin.

“We’re looking at a slowdown relative to what was forecast, almost for sure, and a serious, near 50% prospect of recession.”

J.P Morgan’s chief economist Bruce Kasman predicts a 40% chance of a U.S. recession this year.

“If we would continue down this road of what would be more disruptive, business-unfriendly policies, I think the risks on that recession front would go up,” he told reporters.

Of CFOs polled in the latest CNBC CFO Council Survey, the majority (95%) said government policy is impacting their ability to make business decisions. Three-quarters expected the economy to enter a recession in the latter half of this year or in 2026.

So what exactly defines a recession?

In the U.S., recessions are officially declared and dated — often retroactively — by the National Bureau of Economic Research (NBER) Business Cycle Dating Committee.

The committee defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

In wider practice, two consecutive quarters of negative gross domestic product (GDP) growth point to a recession.

Though there hasn’t been an official declaration, there are three warning signs all pointing to a potential recession:

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The yield curve is signaling a recession. One predictor of a recession is when the yield on 10-year Treasury bonds falls below that of the three-month Treasury bill.

This occurred in late 2022 and lasted until late 2024, and occurred again in late February — and the yield spread between the two remains negative.

The time from when this situation occurs until the onset of a recession can vary, but it’s a strong indicator of a recession in the coming 16 to 20 months.

Leading economic indicators are pointing to a slowdown. Another predictor is the Conference Board Leading Economic Index (LEI). This index fell%20in%20January.) in February for the third consecutive month. The Conference Board is forecasting that GDP growth will slow.

Data and sentiment are turning negative. Consumer confidence is dropping, recent data for retail sales has been weak and the Federal Reserve Bank’s Economic Policy Uncertainty Index is high. CEOs are more pessimistic, consumers are pulling back and “workers are getting nervous,” according to The Wall Street Journal. And the Federal Reserve Bank of Atlanta’s GDPNow forecasting model is predicting that GDP growth will retract by 1.8% in the first quarter of 2025.

Be proactive to weather a downturn

All this talk of a recession may have you concerned. The best approach is to be proactive — but not panicked.

Build up an emergency fund. Prepare for potentially difficult times by setting aside an emergency fund that covers at least three months to a year of expenses, depending on how long you think it might take to get a job if you’re laid off. To boost your savings, investigate a high-interest savings account (HISA) or a high-yield savings account.

Pay down debt and avoid unnecessary expenditures. Servicing a large amount of debt could be a problem if your income declines or everyday costs go up (like egg prices). Avoid extra financial stress by creating a budget, paring down spending where you can and weighing large purchases carefully.

Protect or increase your income. You may want to look into a side hustle or second job to bring in some extra cash.

Talk to a financial adviser about how to maximize your investment performance. Make sure your portfolio is suitably diversified, including geographically, with exposure to sectors that perform better in a recession.

Most financial professionals advise against trying to time the market. Multiple studies show that staying in the market during downturns leads to better long-term returns, especially when you employ dollar-cost averaging — investing the same amount of money in the same securities at regular intervals regardless of their prices.

If you’ve been laid off, talk to your adviser about strategies that may make sense in low-tax years, such as a Roth conversion.

You may not have much control over whether there’s a recession, but you can take steps to weather the storm.

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Laura’s 83-year-old mother is still sharp, stays active and pays her bills on time. But Laura no longer visits because her mother doesn’t want to host anyone in her “messy” condo.

The problem is, it’s more than a mess; her mom is a hoarder.

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Laura doesn’t know how to address the situation with her mother, but she’s worried. Cardboard boxes, old newspapers and piles of papers are a fire hazard, and rotting food and garbage could lead to mold or vermin. Those pose risks not only to her mother’s health, but to other tenants in the building.

But she’s also worried that if the condo board finds out — say, the neighbors start to notice a bad smell coming out of her mother’s unit — that social services could end up getting involved. Maybe she’d even get evicted.

Should Laura step in before someone else does?

The many risks of hoarding

Laura’s mother is far from alone. About 2% of Americans (and 6% of those over 70 years old) are compulsive hoarders.

Hoarding isn’t just living with clutter and mess; it’s a mental illness that can interfere with physical, emotional and even financial wellbeing.

Hoarding is defined as a “persistent difficulty discarding or parting with possessions, regardless of their actual value,” according to the Mental Health Academy. “The difficulty is due to a perceived need to save the items and to the distress associated with discarding them.”

Aside from making it difficult to perform everyday tasks, hoarding has potential health and safety risks (not to mention the risks of social isolation).

For example, it can be a fire hazard and lead to infestations, such as cockroaches, bedbugs or mice. Once pests take up residence, it can lead to health issues such as asthma and other respiratory conditions.

But it can also lead to financial risks. Some hoarders don’t pay their bills because they can’t find the paperwork. But they also risk eviction. While technically you can’t be kicked out of your home for being messy, a condo board could make a case for eviction if hoarding endangers other tenants or the property, or if it violates safety, fire or building codes.

“More tragically, those who hoard are more often subject to forced evictions, and if health authorities or environmental health officers become involved, the cost to the hoarding tenant may be considerable if the home is subject to a forced clearing-out,” according to the []Mental Health Academy](https://www.mentalhealthacademy.com.au/blog/hoarding-disorder-the-items-and-the-impact).

To top it off, if they’re evicted they may have a hard time finding another home, since they’d be unlikely to get a positive reference from their current landlord.

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How to manage a hoarding situation

Laura could talk to her mother and offer to help her “declutter.” If her mom isn’t amenable to the idea, she may have to address the situation with the condo board — for the sake of her mother’s health and safety. If that’s the case, she may want to come up with a plan to address the issue in a timely fashion so the condo board doesn’t escalate it further.

The condo board will likely have a process in place for dealing with this type of scenario; usually, the tenant is given a certain period of time to clean their unit. If the tenant ignores this request, however, the condo board could file a petition to have the unit cleaned, which could be particularly distressing for a hoarder.

Laura may want to consult a therapist or even a professional organizer specializing in hoarding, who could help to create a more gradual — and compassionate — plan for decluttering.

Rather than focusing on the possibility of eviction, it may be more useful to focus on the hoarding behavior and what’s causing it. By offering support and resources — and by bringing in professional help — it could lead to a more sustainable solution.

After all, forcing someone to declutter without addressing the root cause means they’re likely to repeat the hoarding behavior.

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Mark was nervous about taking the leap and investing in the stock market. As a 35-year-old health-care worker, he’d never had time to learn about the market — but with a lot of money sitting in the bank, he felt it was time to get some professional help and start making his money work for him.

He started working with an advisor, who suggested — as part of a larger financial plan — that Mark put $95,000 into an S&P 500 index fund in early February.

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But then the market plummeted and by early April he’d lost about $15,000. While the market has made a slight recovery, Mark has yet to recoup his original investment. No wonder he’s anxious.

His advisor has told him to stay calm and hold on, but he’s wondering how long it could take till he breaks even, let alone sees a return.

No easy answers with a market correction

Numerous factors impact stock market returns, including overall economic conditions (e.g., GDP, unemployment rates), inflation, interest rates, market sentiment and geopolitical events. There’s no simple formula to predict when the market will fully recover. It could be days; it could be years.

While past performance may not predict future performance, Mark’s advisor pointed out some recurring themes that may be helpful in easing his mind.

Stock markets tend to go up over time as economies grow. For instance, the S&P 500 has returned about 10% per year (about 7% after inflation) since its inception in 1957.

This doesn’t mean the market won’t experience volatility along the way. For example, in 2024, the S&P 500’s worst sell-off was 8.45%, its biggest rally was 31.54% and it ended the year up 25.71%. Also, declines of 10% or more are common, occurring in more than 47% of the calendar years from 1980 through 2024.

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Between the Second World War and 2020, there were 26 market corrections of 10% or more from a recent 52-week high close, according to a Goldman Sachs analysis.

The average decline in these bear markets was 13.7% over four months. It took an average four months to recover the losses. In 12 of the 26 corrections, it took an average 24 months to recover.

There have already been two bear markets in the 2020s — outside the period studied by Goldman Sachs.

The first, which followed a market peak in December 2019, took only four months to recover from the March 2020 trough. The second, driven by the war in Ukraine, supply chain disruptions and rising inflation, took six months to recover from its September 2022 trough.

How long this current correction will take to recover is uncertain; it could progress into a bear market or it could recover quickly.

However, it’s being driven by erratic policy decisions. If these continue to recur, they’ll maintain a high degree of uncertainty — which is bad for markets — and could harm the underlying economic fundamentals.

This correction also appears somewhat atypical, as usually equity market sell-offs are “risk-off” trades where investors move into less risky assets such as Treasurys. This time, long-dated Treasury prices and the U.S. dollar have fallen as well.

Dealing with a market sell-off

What should Mark do to deal with this uncertainty?

It can be tempting to get out when markets are falling. After all, the prospect of continued losses is daunting — but research shows that time spent out of the market can be costly.

Missing just the five best days for the S&P 500 from Jan. 1, 1988 to Dec. 31, 2024 might mean missing out on the potential 37% gains that some of those who stayed invested in the market enjoyed over that period.

In early April, the S&P 500 lost 12% over four days — a move some might see as a sign to exit the market.

Right after, the market leapt 9.52% to notch its third biggest single-day gain in the post-WWII period. If Mark missed this day, he would have missed a chance to recoup a substantial portion of his losses.

To take advantage of this market sell-off, Mark might consider putting more money into the market by dollar-cost averaging.

This means he’ll buy the same dollar amount of units of the S&P index fund at regular periods, such as every month, regardless of the price of the index fund. In this way, he’ll buy more units when the fund is cheaper and fewer when it’s more expensive.

Since his S&P 500 index fund is part of a larger portfolio, he should also reconsider rebalancing. For instance, if his portfolio was invested 80% in equities and 20% in fixed income, he might want to sell fixed income to buy equities to ensure this weighting is maintained.

Luckily, Mark is a few decades away from retirement and he won’t realize any losses until he sells, so he has time to weather a long bear market to see it through to recovery.

But he’ll want to make sure his investments are invested appropriately for his goals, age and risk tolerance — and maybe not check on them daily.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Life doesn’t always go as planned. Maybe you lost your job or you’re facing uninsured medical expenses. And maybe you’ve already run through your emergency savings.

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It may be tempting to tap into your 401(k), especially if you still have a few decades to go before retirement.

But should you?

More Americans are treating their 401(k) retirement savings like an emergency fund. That’s according to a preview of Vanguard’s How America Saves 2025 report, which says that 4.8% of participants initiated a hardship withdrawal in 2024, up from 3.6% in 2023. The full report, based on nearly 5 million defined contribution (DC) plan participants, will be available in June.

A hardship withdrawal is a one-time withdrawal from your 401(k) for an “immediate and heavy financial need,” according to the IRS. This lump sum is limited to “the amount necessary to satisfy that financial need.”

Why are more Americans tapping into their 401(k)?

In 2024, 401(k) hardship withdrawal rules changed in accordance with the Securing a Strong Retirement Act of 2022 (SECURE 2.0).

“Given that it’s now easier to request a hardship withdrawal and that automatic enrollment is helping more workers save for retirement, especially lower-income workers, a modest increase isn’t surprising,” noted the Vanguard report.

Overall, despite a “few signals of a possible uptick in financial stress,” the report noted that participants are “generally resilient” and “maintain a long-term approach to retirement saving.”

That could be, in part, because of the growing adoption of automatic enrolment (where contributions are automatically deducted from your paycheck) and the growing use of professionally managed allocations, which has helped to increase savings while improving “age-appropriate equity exposure.”

However, these numbers reflect the economic trends of 2024, including real GDP growth, moderating inflation and low unemployment, along with strong consumer spending — though household debt continued to rise during the year.

But the economic outlook isn’t an sunny in 2025, with analysts lowering their GDP forecast for 2025 and raising the probability of a recession.

So it’s possible that hardship withdrawals could increase in 2025. “Given the current economic climate, a greater number of participants may be requesting hardship distributions from their retirement plans,” the IRS currently states on its website updated this month.

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What you need to know about hardship withdrawals

Generally speaking, a hardship withdrawal is considered a last resort. If you’re thinking about going this route, you may want to exhaust all other options first.

If you’ve already used up your emergency fund, you may want to consider other sources of income. For example, if you have two vehicles, could you sell one of them? Could you take on a side gig to earn extra money? Could you get a roommate to cut down on household expenses?

You may be able to withdraw from your other retirement savings, such as a Roth IRA (that could be preferable to a hardship withdrawal, because these contributions have already been taxed). You may want to consult with your financial advisor to crunch the numbers.

Another option is a 401(k) loan, which you have to pay back — but at least the interest you pay on the loan goes back into your account. However, not all plans offer 401(k) loans; you’ll have to check with your HR department to see if this option is available to you.

When you make a hardship withdrawal, that money is considered taxable income. Plus, you’ll be subject to a 10% early withdrawal penalty unless you’re age 59½ or older or qualify for another exception. These may include the birth or adoption of a child, a federally declared disaster, or total and permanent disability.

You may also be able to take one penalty-free withdrawal of up to $1,000 per calendar year for personal or family emergency expenses, but you will have to repay the distribution within three years.

There are also the long-term costs of hardship withdrawals. You’ll lose out on the compounded earnings you could have made from that money if it was still sitting in your account.

If you’ve exhausted all other options and still decide to go ahead with a hardship withdrawal, talk to your plan administrator so you understand how it works and the potential consequences.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

With the Trump administration’s political and economic policies shocking many around the world, some strategists are pondering if American exceptionalism is at risk.

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U.S. exceptionalism is the belief among investors and businesses that the country is unique and superior to others. This idea bolsters its economy.

Predictability and the rule of law have given the U.S. this “edge,” according to Mohamed El-Erian, president of Queens’ College in Cambridge and chief economic advisor at Allianz, but he worries that it is being “eroded.”

“The more these two things are questioned, the more that people are going to start questioning U.S. exceptionalism,” he told Bloomberg last month. He stopped short of announcing the death of U.S. exceptionalism, but said it is “under enormous pressure."

When President Donald Trump was elected in November, investors were betting on his policies like tax cuts to spur economic growth and boost U.S. stocks.

But an on-again-off-again trade war, along with an “aggressive posture toward Ukraine and a wave of Elon Musk-driven government cuts,” are instead undermining sentiment, according to BNN Bloomberg, which noted that the “Trump bump is now the Trump slump.”

The dollar has been weakened. The U.S. stock market is also lagging behind the rest of the world this year. U.S.-listed international stock ETFs saw inflows of $13 billion in March and $28 billion in the first quarter, according to Morningstar. "Europe-stock category jumped off the page in the first quarter. It reeled in $5.7 billion in March — its best month in exactly 10 years — to cap off an $8 billion first quarter."

“There’s been an enormous upending of all the consensus trades that were in place at the beginning of the year,” El-Erian told Bloomberg. “All those trades have been turned on their heads.”

Questioning American exceptionalism

Back in November, Oxford Economics remained optimistic that U.S. exceptionalism would continue in 2025, noting that it’s not the first time the economy “has dealt with elevated uncertainty” and that businesses would be able to “quickly adapt.”

With “the prospects for expansionary fiscal policy on top of an already solid backdrop for U.S. consumer spending and investment, the U.S. economy will likely further distance itself from the rest of the pack,” it noted.

Fast-forward a couple of months, and a lot has changed. U.S. CEO confidence plummeted in March, according to one survey, and the Trump administration’s gyrating tariff threats was the most commonly cited reason for declining optimism. U.S. consumer confidence has also tumbled. The Federal Reserve has lowered its gross domestic product (GDP) growth forecast for this year to 1.7% from 2.1%. Strategists at Morgan Stanley and Goldman Sachs downgraded GDP growth forecasts for the U.S. in 2025 over tariff concerns.

Citi strategists are saying U.S. exceptionalism has “paused” under the Trump administration. Not only has the bank downgraded U.S. stocks to “neutral,” it has upgraded Chinese stocks to “overweight,” and recommends taking profits in U.S. stocks to invest in Chinese companies.

"The drivers of ‘exceptionalism’ are fading, both from a GDP and EPS perspective. Tariffs, as they stand, could negatively impact US EPS the most," Citi said on April 14, according to Reuters.

J.P. Morgan’s chief economist Bruce Kasman told Reuters the country’s standing as an investment destination and its “exorbitant privilege” are at risk of lasting damage if the administration undermines trust in U.S. governance.

El-Erian also told Bloomberg that there’s hope for a “Sputnik moment” in Germany, as the country shifts fiscal policy to support a surge of spending on defense and infrastructure.

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How can investors make sure they’re well diversified?

This may be a good time to make sure your portfolio is diversified geographically.

Vanguard, for example, recommends having 20% of your portfolio invested in international stocks and bonds, but “to get the full diversification benefits, consider investing about 40% of your stock allocation in international stocks and about 30% of your bond allocation in international bonds.”

One of the easier ways to gain broad exposure to international assets is ETFs. You have a choice of investing in developed markets (which would include the U.K., France and Japan) or emerging markets, like China, India and Mexico. Since emerging markets tend to be more volatile, Vanguard recommends “that you don’t overweight your allocation to emerging markets.”

When it comes to buying foreign stocks, ETFs are often a better choice than mutual funds, according to Forbes, since “ETFs are very portable from one brokerage account to another” and they’re “better at tax time.”

You’ll want to do your research or talk to your adviser about the potential risks involved such as market risk and liquidity, as well as costs, fees and tax issues. There are a number of ETF providers to choose from, including iShares by BlackRock, Vanguard, Charles Schwab, Invesco, WisdomTree and VanEck, among many others.

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• Do you rely on your monthly Social Security check to get by? Here are 5 simple money moves for American seniors during Trump’s presidency

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Long-term investing can test even the most disciplined investors. With markets swinging on everything from AI breakthroughs to political headwinds, the temptation to act emotionally — especially during big wins or downturns — is real.

Amos Nadler, a behavioural finance expert and former professor at Western University’s Ivey Business School, knows this first-hand. Years ago, he bought shares of Nvidia (NASDAQ:NVDA) for just US$0.48 each. But before the chipmaker exploded into a US$3 trillion AI juggernaut, he sold most of his holdings — missing out on one of the biggest stock runs in tech history. As of March 2025, Nvidia trades around US$108 a share, after its value surged on AI chip demand and record-breaking earnings.

Nadler’s story is more than a missed opportunity — it’s a case study in cognitive bias, and it holds critical lessons for investors trying to navigate 2025’s volatile but opportunity-rich market.

The biggest reason for investor mistakes

When Nadler was starting his teaching career, he wanted to gain some hands-on investment experience to share with his students. As a result, one of his earliest investments was stock in technology company Nvidia (NASDAQ:NVDA)— about US$800 to US$1,000 worth of stock. He paid approximately US$0.48 per share.

After holding them for a period of time, Nadler noticed that the shares had earned a decent profit so he decided to sell a large chunk of his holdings. This was before 2014 and before Nvidia (NASDAQ:NVDA) would become a household name.

Nadler’s goal was to talk about his experience. Turns out the sale gave Nadler lots to talk about with his students — since it was a big mistake.

“I needed some war stories. I needed to talk about gains and losses,” he recently told CNBC Make it. “I need to put my own money to play and experience these things, and take it out of the lab, take it out of the textbooks.” Nadler’s lesson should be used by any investor tempted by bias or emotion.

According to his trading brokerage, Nadler paid about US$0.48 per share, factoring in the stock splits during the company’s history. As of March 31, 2025, Nvidia (NASDAQ:NVDA) stock closed to US$108 per share, reflecting recent market volatility influenced by factors such as underwhelming initial public offering (IPO) of CoreWeave and concerns over potential tariff implementations. The firm’s value increased by more than US$2 trillion just last year.

If Nadler had held onto the stock, his gain would have been over 28,000%. The value of his holdings would have been “enough to buy a nice house somewhere,” according to Nadler.

Here’s the thing: Nadler sold the stock because he succumbed to a cognitive bias known as loss aversion. A cognitive bias is a consistent, repeated error in the way we process information and perceive reality. Loss aversion is a common cognitive bias that leads us to perceive losses as more significant than gains.

In investing, loss aversion can cause us to fear losing the gains of a winning bet in our portfolio. It’s what happened to Nadler when he chose to sell his Nvidia (NASDAQ:NVDA) stock. As he tells it, “What was going through my head was, ‘Hey, I’m new with this. I just made a significant profit in a very short amount of time. I want to lock it in because I’m feeling afraid it may drop again.’”

How loss aversion is driving your investment decisions

You can judge your own loss aversion by considering whether you’d rather have $100 or flip a coin to either gain $200 for heads or $0 for tails. Most people would prefer the certain $100 and value the potential “loss” of this as greater than the potential but uncertain gain of $200. Still not sure, consider the same coin toss scenario but with a payout of $500 or $1,000. The lower the sum you’re willing to accept, rather than risk for the 50/50 chance of getting more, illustrates how risk averse you are (both in coin tosses and investing).

So, how does loss aversion impact your investment decisions?

If you choose to cash-in on your gains, end up being too conservative in your portfolio construction, try to time your entry into the market or instinctively move to cash to avoid volatile markets than you’re operting from a loss aversion bias — and this can all hurt your overall portfolio performance.

Avoiding this cognitive bias means carefully evaluating any stock sale, especially if you plan to move to cash, and trying your best to remove emotion (such as fear) from the decision. For instance, if you’re planning to sell a stock because it’s had a strong run, but fundamentals suggest it’s still a solid investment, you may want to step back and evaluate whether you’re making a rational decision or your actions are being driven by fear.

Engaging with a financial adviser could potentially help you manage that fear by providing an arms-length assessment of your decisions. An adviser could also help you set realistic investment goals so you’re not relying on “bets,” while also helping you diversify your holdings to spread your risk and make individual risks within the portfolio feel less intimidating.

Increasingly, there are also technological tools available to help you remove emotion from investment decision-making. For instance, Nadler founded Prof of Wall Street, which provides software products that help investors use behavioural science to manage biases and improve investment decision-making.

Fear can be a powerful force. Identifying it and enlisting the help of a financial adviser or technological tool could help to take the cognitive bias out of investment decision-making and, hopefully, result in better returns.

Sources

1. CNBC Make It: I sold Nvidia — then it went up over 28,000%, says behavioral finance prof: I could’ve bought ‘a nice house somewhere’, by Ryan Ermey (Dec 12, 2024)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.