Preparing for retirement amid a trade war

Summary

Marketplace Morning Report: Preparing for Retirement Amid a Trade War Release Date: April 11, 2025

In this episode of the Marketplace Morning Report, host David Brancaccio delves into the complexities of retirement planning amidst an escalating trade war between the United States and China. The discussion navigates through the economic ramifications of increased tariffs, market fluctuations, and expert advice on safeguarding retirement funds during uncertain times. Additionally, the episode touches upon significant developments in the luxury fashion industry, highlighting Prada's acquisition of Versace.

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1. Escalating Trade War and Its Economic Implications

David Brancaccio opens the episode by outlining the latest developments in the US-China trade war:

• Increased Tariffs: Following the Trump administration's confirmation, Chinese tariffs on US goods surged by 145%, while China reciprocated by raising its tariffs on US products to 125%. China has also indicated it will disregard any further tariff escalations from the US.

• Banking Sector Response: Morgan Stanley reported robust profits for the last quarter. However, the bank has cautioned about potential loan losses and increased financial market turbulence stemming from the ongoing trade tensions and recession fears.

• Currency Fluctuations: The US dollar has depreciated to a three-year low, with the euro now priced at $1.14. Nancy Marshall Genzer from Marketplace explains that, contrary to typical global turmoil scenarios where the dollar strengthens as a safe haven, this trend is reversing. Deutsche Bank has raised alarms about a possible crisis of confidence in the dollar, exacerbated by inconsistent US tariffs and bleak recession forecasts.

  "Usually the dollar rises when there's global turmoil because investors see the greenback as a safe haven. That's not happening right now."
  — Nancy Marshall Genzer [00:41]

2. Market Performance Amid Tariffs

Brancaccio provides a snapshot of the current market landscape:

• Stock Market:

  • The S&P 500 has declined 7.1% since just before President Trump's tariff announcement on April 2.
  • Year-to-date, the S&P is down 10.4%, while the NASDAQ has plunged 15%.

• Bond Market: Yields on the 10-year Treasury have risen to 4.46%, indicating investor apprehension.

• Futures and Inflation: P and Nasdaq futures have seen a modest uptick of 0.6-0.7% following a favorable wholesale inflation report for March, attributed largely to falling crude oil prices.

  "With worries of recession, the U.S. dollar hit a three-year low today. Euro costs $1.14 now."
  — David Brancaccio [00:01]

3. Expert Insights on Retirement Planning Amid Economic Uncertainty

To navigate the turbulent financial waters caused by the trade war, Brancaccio consults Barry Ritholtz, Chairman and Chief Investment Officer at Ritholtz Wealth Management.

• Tailored Investment Strategies: Ritholtz emphasizes the importance of aligning investment decisions with individual financial goals and retirement timelines.

  "What are your financial goals? When are you planning on retiring? When do you need this money?"
  — Barry Ritholtz [02:22]

• Long-Term vs. Short-Term Planning: For those with a retirement horizon of 10-20 years, Ritholtz recommends maintaining regular contributions and opportunistically buying into the market during significant downturns. Conversely, individuals nearing retirement (12-24 months) should exercise caution, as market volatility can severely impact their retirement funds during the critical phase of withdrawal.

  "If you're retiring in the next 12, 18, 24 months, hey, maybe buying the dip isn't ideal for you because you're going to be drawing down and you have to make sure your portfolio is robust enough to withstand that sort of volatility."
  — Barry Ritholtz [03:01]

• Sequence of Returns Risk: Ritholtz introduces the concept of the "sequence of returns problem," where the timing of investment losses can significantly diminish the amount one can withdraw over their lifetime. Starting retirement during a market downturn can erode the portfolio's ability to recover, jeopardizing long-term financial stability.

  "It's knowing that if you start retirement in a drawdown, it has a substantial impact on how much money you're capable of pulling out of your lifetime."
  — Barry Ritholtz [03:33]

• Practical Implications: The discussion extends to scenarios such as parents needing to fund college education or purchase a home, underscoring the necessity of proactive financial planning in the face of economic uncertainties.

  "If you have a young child who's not going to college for 10 or 15 years, it's a non-issue today because you're looking on the other side of this. On the other hand, if you have a 15-year-old who's going to start college in 2026, 2027, this is a really challenging set of circumstances."
  — Barry Ritholtz [04:22]

Ritholtz concludes by highlighting his expertise and contribution to financial literacy through his book, "How Not to Invest."

"Well, thank you for having me." / "Thanks so much."
— Barry Ritholtz & David Brancaccio [04:40 - 04:49]

4. Luxury Fashion Sector: Prada's Acquisition of Versace

Transitioning from finance to fashion, Brancaccio discusses Prada's strategic move to acquire Versace:

• Acquisition Details: Prada, an iconic name in minimalist Italian fashion, is purchasing Versace for $1.4 billion. This merger aims to blend Prada's understated elegance with Versace's bold, maximalist designs.

  "Prada's clothing as being more minimalist and Versace's as being more maximalist."
  — Stephanie Hughes [05:26]

• Industry Insights: Milton Pedraza of the Luxury Institute notes that Versace has faced revenue declines (15% drop last quarter), and Prada's acquisition could revitalize Versace by steering it towards a broader, global customer base.

  "Versace's revenue dropped by 15% last quarter and Pedraza says with this acquisition, Prada is getting a well respected fixer upper and one that could put it on a new path."
  — Stephanie Hughes [05:39]

• Global Market Challenges: Susan Scoffitti from the Fashion Law Institute emphasizes the importance of the "Made in Italy" label in luxury branding. However, expanding beyond Italy into larger markets like the US is crucial. Tariffs could pose challenges by making luxury items more expensive, potentially dampening demand among aspirational consumers.

  "If tariffs make those colorful Caligula type pieces more expensive, then they might hold off."
  — Stephanie Hughes [06:08]

The acquisition reflects a strategic consolidation within the Italian luxury fashion sector, aiming to enhance global competitiveness and market reach.

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Credits:
Produced by Kelly Silvera, Digital Producers Dylan Miettinen and Jared Dang. Engineers Brian Allison and John Brewington in Los Angeles. Hosted by David Brancaccio.

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This episode of the Marketplace Morning Report offers a comprehensive analysis of how the ongoing trade war between the US and China is influencing retirement planning and the broader economic landscape. Expert insights from Barry Ritholtz provide valuable guidance for individuals navigating their financial futures during these uncertain times. Additionally, the segment on Prada's acquisition of Versace underscores the interconnectedness of global trade dynamics and the luxury fashion industry's strategic maneuvers.

Transcript

[David Brancaccio]

How the trade war is making retirement planning harder. I'm David Brancaccio in Los Angeles. After the Trump administration confirmed yesterday China tariffs are up at 145%. China today put its tariffs on US goods up to 125% but said it would ignore any further escalation by the U.S. meanwhile, one of the big banks, Morgan Stanley, reported strong profits for last quarter this morning but raised a warning flag about loan losses ahead and turbulence in financial markets given tariffs. With worries of recession. The U.S. dollar hit a three year low today. Euro costs $1.14 now here's Marketplace's Nancy Marshall Genzer.

[Nancy Marshall Genzer]

Usually the dollar rises when there's global turmoil because investors see the greenback as a safe haven. That's not happening right now. Last week Deutsche bank warned there could be a crisis of confidence in the dollar as investors grapple with the uncertainty caused by the on again off again US Tariffs and some economists grim predictions of recession. A lower you'll pay more for imports because it takes more dollars to buy the foreign currency importers need to buy things from other countries. Importers usually pass that extra cost on to consumers. But a lower dollar makes US Exports cheaper. Foreigners are essentially getting them at a discount because they get more dollars for their currency which they can then use to buy US Products. I'm Nancy Marshall Genser for Marketplace S.

[David Brancaccio]

And P and Nasdaq futures are up in the six to seven tenths of 1% range after a key reading on wholesale inflation came in tame this morning. That's for pre tariffs March and mostly due to falling crude oil prices. The bond market is down, pushing the 10 year interest rate up to 4.46%. Now stocks the S&P is down 7.1% since just before President Trump's April 2nd tariff announcement and down 10.4% year to date. The NASDAQ is down 15% year to date. What are you we supposed to do about it? Let's consult Barry Ritholtz, chairman and chief investment officer at Ritholtz Wealth Management in New York. Welcome.

[Barry Ritholtz]

Well, thank you for having me.

[David Brancaccio]

Let me guess, I bet this happens to you. It happens to me. When people know what I do for a living. It probably goes something like hey Bear, should I buy the next dip in the market? What do you tell them?

[Barry Ritholtz]

So my answer is always what are your financial goals? When are you planning on retiring? When do you need this money? If you're 10, 20 years away from retirement, sure you should be making regular contributions. And every time the market is 15, 2025% down, you should throw a little more capital at it. But if you're retiring in the next 12, 18, 24 months, hey, maybe buying the dip isn't ideal for you because you're going to be drawing down and you have to make sure your portfolio is robust enough to withstand that sort of volatility.

[David Brancaccio]

I mean, I feel especially bad for people who need their money right away. They turn 65, not in months, but five weeks from now, and they were all set to jump out of the rat race and all this happens.

[Barry Ritholtz]

That is one of the biggest problems that we encounter. In fact, no less say notable than Bill Sharp, Nobel Laureate has said that challenge is one of the thorniest problems in all of finance.

[David Brancaccio]

Thorny is problems is knowing when to get out or if you're getting close to really needing your money. What posture do you adopt?

[Barry Ritholtz]

Some people have described this as a sequence of returns problem. It's knowing that if you start retirement in a drawdown, it has a substantial impact on how much money you're capable of pulling out of your lifetime. In other words, you're much better off with a plus 10% having a minus 10% somewhere 10 years down the road then starting out 10% in the hole. Anything you sell to draw down. And let's use 4% as kind of the industry standard, that's 4% that you're drawing down at a minus 10% that never has a chance to recover.

[David Brancaccio]

Could be parents who need to pay for some college education soon or they want to liquidate to get a house. But it's something that you need to plan for.

[Barry Ritholtz]

That's right. If you have a young child who's not going to college for 10 or 15 years, it's a non issue today because you're looking on the other side of this. On the other hand, if you have a 15 year old who's going to start college in 2026, 2027, this is a really challenging set of circumstances.

[David Brancaccio]

Barry Ritholtz, co founder, chairman and chief investment manager at Ritholtz Wealth Management. He's also author of how not to Invest. Very always good to catch up.

[Barry Ritholtz]

Thanks so much.

[David Brancaccio]

Can you mix Prada with Versace or is that a fashion faux pas? Prada of Italy is buying Versace, also from Bella Italia. Capri Holdings. Versace's parent is paying $1.4 billion. As a guy who wears Patagonia and L.L. bean, I hadn't realized that Versace and Prada customers are different. Marketplace's Stephanie Hughes has more.

[Stephanie Hughes]

Think of Prada's clothing as being more minimalist and Versace's as being more maximalist.

[Barry Ritholtz]

Very dynamic color, very unique look, a little bit of that Roman Caligula look.

[Stephanie Hughes]

Milton Pedraza leads the Luxury Institute, a consulting firm. He's done some work for Versace in the past. He says one challenge Versace faces is that its clothes aren't necessarily everyday staples. Versace's revenue dropped by 15% last quarter and Pedraza says with this acquisition, Prada is getting a well respected fixer upper and one that could put it on a new path where we see at.

[Barry Ritholtz]

Least the beginnings of a luxury fashion conglomerate that is Italian owned and Italian.

[Stephanie Hughes]

Driven, but it'll need to find its customers all around the world, says Susan Scoffitti, founder of the Fashion Law Institute at Fordham. The Made in Italy label is key to luxury, but Made in Italy has to sell outside Italy. Italy is a substantial market, but it's not anywhere near as large as the US And Scafidi says aspirational consumers are a big part of that market. And if tariffs make those colorful Caligula type pieces more expensive, than they might hold off. I'm Stephanie Hughes for Marketplace.

[David Brancaccio]

Our executive producer is Kelly Silvera. Digital producers are Dylan Miettinen and Jared Dang. Our engineers are Brian Allison and John Brewington in Los Angeles. Angeles I'm David Brancaccio. It's the Marketplace Morning Report. We're from apm, American Public Media.

[Janelie Espinal]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined From Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host, Janelie Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially inclined Wherever you get your podcasts.