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The outside of the New York Stock Exchange (NYSE) is seen in New York, U.S., April 2, 2018. REUTERS/Shannon Stapleton - RC14C6636440

As the markets swing, should you be freaking out about your 401K?

As the stock markets plunged Monday over concerns about trade tensions with China and President Donald Trump’s Twitter attack on Amazon, financial experts took to the president’s preferred communication platform to offer some investment advice.

“The President targeting individual companies is just another reason to index,” tweeted Michael Batnick, the author of a forthcoming book on investment strategy. “Can’t avoid these companies in an index,” Jeff Miller, the president of NewArc Investments, shot back. “Choosing individual stocks” is a better approach, Miller added.

The Twitter exchange underscored a new period of uncertainty for Americans worried about their retirement accounts, and how best to protect their investments at a time when a single tweet by the president can spark mass sell-offs on Wall Street. Monday’s downturn followed several major daily stock market drops, including historic single-day declines in February and January.

“People should be nervous,” said Laurence Kotlikoff, an economics professor at Boston University. Investors will spurn the United States if Trump is “not just engaging in a trade war but also going after individual companies like Amazon,” Kotlikoff added.

A reluctance to invest in the U.S. could cause the stock market to plunge further, creating a decline in the value of retirement savings, he said. “There’s no guarantee that our markets will come back. There’s nothing in economics that says something that comes down has to come up,” Kotlikoff said.

The Dow dropped 1.9 percent Monday as investors responded to Trump’s criticism of Amazon and rising fears over a trade war with China and other U.S. trading partners.

Trump accused the tech giant of making money off the U.S. Postal Service, though he didn’t offer evidence of the claim. Amazon’s stock price fell 5 percent, a market value decline of $36 billion.

The president has frequently targeted Amazon on Twitter, including in recent days. On Monday Trump also lashed out against the Department of Justice and the FBI; accused Democrats of failing to save the program that protects young undocumented immigrants from deportation, and claimed Mexico had weak border security and was taking advantage of NAFTA, the North American Free Trade Agreement.

The stock markets grew steadily through most of Trump’s first year in office. But now “the instability of his policies” is having an impact, Teresa Ghilarducci, an economist at The New School, said of Trump. “Not only the trade war but the uncertainty of the deficit is causing pause.”

President Donald Trump talks with a U.S. Customs and Border Protection (CBP) Border Patrol Agent while participating in a tour of U.S.-Mexico border wall prototypes near the Otay Mesa Port of Entry in San Diego, California. Photo by Kevin Lamarque/Reuters

President Donald Trump talks during a tour of U.S.-Mexico border wall prototypes near the Otay Mesa Port of Entry in San Diego, California on March 13, 2018. File Photo by Kevin Lamarque/Reuters

If the trend continues, it could cause a problem for millions of Americans who had not anticipated seeing a drop in their 401(k) retirement savings plans.

Big swings in the stock market spur many people to “get spooked and take money out” when they should leave it in a retirement fund, said Ghilarducci, an expert on retirement economics. People also often respond to stock market volatility by putting less money away for retirement, out of concern that it might get lost in a market downturn, she said.

A sustained period of market instability would also be bad timing for people whose retirement savings are just now returning to the levels they were at before the financial crisis of 2008.

“There are people that haven’t recovered from the volatility and the decline from the last crash,” Ghilarducci said.

Any changes to retirement savings accounts would also have a greater impact than most people realize.

Half of the nation’s roughly 73 million Baby Boomers are poised to retire in the coming years. If Trump gets re-elected in 2020, “he will oversee the last half of the Baby Boomers retiring” during his second term in office, Ghilarducci said. “He is not laying down a foundation for a more stable retirement policy.”

Zvi Bodie, an emeritus economics professor at Boston University, said now was a good time for people who are saving for retirement to consider taking a more conservative approach. “If you don’t sleep at night because you’re worried about the value of your portfolio, you ought to get out of the market, or at least reduce your exposure,” Bodie said.

But other financial experts said that making changes to retirement accounts in response to a bad day or stretch of days on Wall Street made little sense. Taking a long view is more helpful than reacting to the moment, said Robert Merton, a professor of finance at the Massachusetts Institute of Technology.

“Retirement accounts for people go over many, many decades,” he said.

Right now, “the problem is not the volatility. Markets are volatile,” Merton added. “If you have the proper profolio, you shouldn’t be worried at all. The biggest mistake we make is whipping things around. That’s certainly not the best approach to investing.”

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