Divorce Rich with Jacki Roessler, CDFA

Divorce in a Downturn: Stock Market Fears with Wealth Advisor, Melissa Fradenburg

• Jacqueline Roessler • Season 1 • Episode 34

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When market volatility collides with divorce proceedings, the resulting anxiety can feel overwhelming. But what if this turbulence actually presents unexpected opportunities? Jacki Roessler and wealth advisor Melissa Fradenburg cut through the political noise surrounding recent tariffs to deliver actionable financial wisdom for those navigating divorce during uncertain economic times.

This eye-opening conversation tackles the psychological barriers that prevent smart financial decision-making. While most of us hunt for sales when shopping for clothes or furniture, we panic when investments go "on sale" during market dips. 

During divorce, when emotions already run high, this reminder to distinguish between realistic concerns and anxiety-driven fears could be the difference between financial recovery and costly mistakes. Whether you're newly managing investments post-divorce or worried about assets still being divided, this episode offers the clarity needed to make sound decisions despite market turbulence.

RESOURCES:


Visit us at https://www.roesslerdivorce.com/ to learn more about Jacki's practice and to find valuable resources for your case.

Jacki:

Welcome to the Divorce Rich Podcast. I'm your host, Jackie Ressler. I've been a certified divorce financial analyst for 28 years, helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing.

Melissa:

Rich means many things to many people.

Jacki:

I believe the best definition of being rich is someone who has access to many resources, along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future.

Melissa:

Hey everyone, and welcome back to the Divorce Rich Podcast. This is Jackie Ressler, and today I have a topic that we're going to be covering that I know is on the minds of many of my clients, if not all of my clients and so many people and it lines up perfectly with April being Financial Literacy Month, which is exciting, I think, for all people that are getting divorced and have not been used to working with money. My guest today is my friend and friend of the podcast, melissa Freidenberg. She is a wealth advisor with Antonelli Financial Advisors in Grosse Pointe, michigan. She's also a CDFA, like me. She works with men and women throughout the entire phase of their financial life, but I know that she always says her sweet spot is working with post-divorce women to help them make sound financial decisions, and we are going to be talking about the stock market today, so welcome, melissa.

Speaker 3:

Thank you, jackie. I'm excited to be here and I know it seems crazy to be excited to talk about the recent market activity and volatility, but it's all I've been thinking about and talking about for the past couple of days, so this is really timely. And most of your listeners probably know, we used to do a podcast together, so for me, it's just always a great opportunity to connect with you and I just appreciate the opportunity to have conversations with your audience. So thanks for having me.

Melissa:

I'm really excited to have you here and again, I think that it is exciting to talk about what's going on because I think we can really come some people's worries and fears, especially people that are in the process of divorce, who are already feeling like they're kind of on shaky ground. So let's dive in and talk about just from a pure what happened? Moment, If you can explain for us. The stock market is always up and down. There's it does seem to always be something, but what happened over the past week that is causing all of this tumult in the market?

Speaker 3:

Sure. So I mean, I do want to just step back and say it's really hard, and what I hope to do here on this podcast is give people sort of a non-politically leaning idea of what's happening, because it's so interesting. I've never, as a financial advisor, had so many different feelings. I have clients who are euphoric about you know, this is the golden era of the United States. This is going to be fabulous. And then I have people who are literally thinking of buying canned goods and ammo and like hunkering down because they think the end of the world.

Speaker 3:

So for me, one of the most concerning parts is just the disconnect that people on different political sides are having right now. And I think that comes back to really the news and the news outlets not one in particular, but if you're getting your news from one source versus another, you're hearing a completely different story. And then when you add in social media, you know the algorithms. The way it works is if you like something, if you are interested in listening to, you know a reel on how terrible Donald Trump is and how these tariffs are going to blow up the world. You're going to get more of that. So you're going to find your algorithm is going to continue to give you news that you like and vice versa. If you think this is great and you know this has been a long time coming that we, you know, level the playing field for tariffs in this country and we're going to bring manufacturing back, your algorithm is giving you news stories and reels on that topic.

Speaker 3:

So for me, the tariffs themselves aren't as scary as the fact that people are so polarized and, you know, living in the middle of kind of like agreeing with you know different sides on different things and really not being crazy about either of our candidates that we had this past election. For me, I enjoy talking to people with different political views and kind of hearing why they think the way they think. And then I also live in a place where I'm used to getting news from financial sources and it was really hard this past week preparing for this, for client conversations and this podcast, to just get the facts of how they stand. Everything is so slanted one way or another. So I would urge people to try and take whichever side they're on politics out of it and just think about what is this, why are we in this situation and what does it mean? You know, both short-term and long-term, and I hope to do that today. So I hope that wasn't too much of a tangent, jackie.

Melissa:

No, that's perfect. I think that's great advice. And especially, let's say that you haven't been the one handling the money and now, all of a sudden, you know you're going to be in a position where you are going to be making those money decisions and all of the news you get is slanted one way or the other. It's hard to peel back the layers of that. I'm going to figure out oh, what should I be worried about and what should I not be worried about? And even just being able to participate in the conversation and know the questions to ask, and so I greatly appreciate you pointing out that we are living in a highly polarized political climate that just seems to be getting worse and worse as time goes on, and it makes it more difficult for everyone to understand what's going on financially, not just people that are new to managing their finances. So that was perfect, tangent, okay, good, let's break it down into very simply. What is a tariff and why is the market reacting to tariffs the way that it is?

Speaker 3:

Sure. So tariffs are? Essentially, they're based on trade policy, economic goals, political strategy. Governments set tariffs typically in a different format than we've seen in the last week or so, which is one of the reasons it was so jarring for the market, but essentially it is a tax on imported goods and both administrations and many countries use these tariffs. It's not a new thing. It's not something that you know. Donald Trump came up with in the last month and decided to roll out. So even in this past year, there have been tariffs imposed on China by the Biden administration as well.

Speaker 3:

So, again, if you're getting your news from different sources, this is not new and, honestly, tariffs are not inherently good or bad, and that's something that I think people need to understand. So their impact depends on how they're implemented, how the trading partners respond and like a broader economic context of a country's position when they impose these tariffs. So I'm going to give like a really simple example for those you know and if you are more advanced and understand tariffs. I apologize, you may want to skip through this part, but let's use an example of apples, and I honestly don't know the tariff situation with apples If we are an importer or an exporter. I'm just using that because it's like a very simple thing If we grow apples here and say the cost for consumers is $1.25 each, but imported apples from another country cost $1 each, shoppers might choose to buy those imported apples that are cheaper. And personally, as somebody that shops at Trader Joe's for a lot of produce and meat, I know I'm getting imported goods right, not buying necessarily, and that is one of the ways that I've been able to get cheaper groceries these last few months with inflation. So the idea would be imagine the government says okay, well, I'm going to add a 25 cent tariff on all imported apples so that it's an even playing field. So now US apples and imported apples cost the same. That, in a very simple context, is how this works.

Speaker 3:

Now, yes, tariffs can be good in that they protect locally grown, local jobs and industries, but they also raise prices for consumers, because now consumers aren't getting those apples for a dollar and in an environment where inflation and specifically grocery bills personally have been quite high, that is the concern here is this is going to raise prices domestically for people, for consumers. And I have two teenagers. I have a teenage daughter that loves to order things from Sheen and Amazon and you know all these places where you can get such cheap goods. And I'm sure there are a lot of Americans right now that are, you know, staying afloat because of their ability to get cheap goods. And again, I love TJ Maxx and home goods and I'm more inclined to buy home decor from there versus like a local boutique or someplace. You know that makes their wares because of those cost savings. So the idea is real that tariffs can increase prices for consumers and that is one of the biggest concerns with these new tariffs.

Speaker 3:

The other concern with this, and just to kind of give you the, basically the administration announced that there would be a 10 percent universal tariff on all imports effective April 5th, which was this past Saturday. So that was announced last Wednesday and then the market sold off on Thursday and Friday quite dramatically. The biggest thing to understand is it wasn't selling off because these tariffs are terrible and the world's going to come to an end. Quite frankly, I think myself and a lot of people don't believe that the tariffs as they stand today will remain in place. It is used as a negotiating tactic to get more fair trade policies. I guess that's the hope, I will say. And since that market sell-off. There have been countries that are approaching the US for negotiation, for leverage or for negotiation, kind of adding to the idea that this was done for leverage, not actually imposing all these tariffs.

Speaker 3:

So if that makes sense again not saying that the tariffs are good or bad the reasoning behind it, the administration and people who support these tariffs want to bring manufacturing back. They want to even the playing field for goods in the US versus imported goods. And then the people who are against it. It's because of the price increase they're saying with inflation already that people have been experiencing this is going to raise prices and, of course, the retaliation from places like Europe and China that will impact. You know supply chains, consumers, exporters, certain businesses that have. You know that and I will say this that the biggest reason the market sold off so quickly is the unknown. The market does not like uncertainty and so the way that the tariffs were delivered so abruptly and going into action within a couple days of the announcement, without people being able to plan and companies being able to plan for their supply chains and countries being able to plan, is the reason the market is digesting this and going.

Speaker 3:

What is happening here, because this isn't the usual. Like we've seen with this administration, this is not the usual way to go about it, right? So there are often trade negotiations and, as I said, there are tariffs being imposed on countries who might be flooding the market with cheap goods. This is something that happens all the time, but it usually is a negotiated Slower. It goes much slower. It goes through the World Trade Organization, sort of as a mediator. This is not like, hey, I'm doing this. It's happening on Saturday, you know, while standing in the Rose Garden at 4 pm on a Wednesday. So the delivery was not ideal. I'll leave it at that Again, trying to keep politics out of it.

Speaker 3:

But both sides, for years, democrats and Republicans alike have been saying we need to fight for fair trade policies because the American worker, and specifically the middle class, is being hurt by this. So I am going to say that the fear that the market has is real. Some of it is uncertainty, and then it's also looking at long-term, like, because this has been not negotiated in the normal way that we see these tariffs negotiated. What is the long-term implication with our trading partners and allies? Are they going to trust us in the future to not change the rules on them right.

Speaker 3:

So, like I think most people will agree that the tariffs as they stand probably aren't fair to the United States and you'll hear people in manufacturing talking about this it's very real to them. So people that support the tariffs again are not wrong. But again, it's the delivery of this and we are known the United States is known as following the rules right. Other countries don't always follow the rules of engagement when it comes to these types of things. The US has always been a trading partner that follows the rules and implements these in a way that countries can plan for and have expectations for, and that just didn't happen in the last week. So I think that spooked the market even more, and that's kind of what's happening in a nutshell, okay.

Melissa:

That is perfect. I love how you talk about apples and make it something that we can understand. And yet there's definitely concerns about how our prices are going to be impacted and, like you said, groceries are already so high. So that's what's going on and, as you explained, the market was very reactionary and like a knee-jerk reaction you know everyone sort of panicking.

Melissa:

Let's say that you are working with a post-divorce client and I know you work with a lot of post-divorce clients and they open up their statement or they hear on the news stock market crashing. What should they do right now to protect themselves? And I've gotten a lot of phone calls from clients saying should I sell everything off? So I'm in charge now of my finances? Or, even worse, I'm not in charge. I have no influence right now, where we're going through the divorce, and I'm just scared because I can't make I don't make any of the financial decisions my spouse does. What do I do? Do I? How do I protect myself? Should I completely redo everything, take all the cash and the house equity and avoid taking any of the investment accounts?

Speaker 3:

So that is the question that I've been getting from people mostly not people that are my clients, because I have been communicating with them proactively on what we're going to do. But you know, people who I've talked to friends, family, anybody I'm having a conversation with is like what do I do now? So the one thing is not to panic, especially in a situation where you don't have control. Like you said, you're like maybe you're in the divorce process and things are allocated how they're allocated and you may not have either the ability to make any changes in those accounts, because it's not up to you yet, because you're still in process, or now, all of a sudden, you're, you know, in control of these. You're not up to you yet, because you're still in process, or now, all of a sudden, you're, you know, in control of these. You're not sure what you're doing right. So the number one thing I would say is, if you are in control and you can't, and you had made changes, but you're not sure what to do, I do advise you to meet with a financial professional and get some advice, because really I love when people understand how the market works and they know what to do. But if you don't know what to do. That's where mistakes happen. So a couple things. One is assess the damage. Now I know people will say don't open your statement, don't look at it. That is advice for people who have a good sense of how things are allocated. So if you're in a situation where you don't know how it's allocated or if it's allocated correctly for your personal risk tolerance, I do want you to look and assess the damage.

Speaker 3:

Now. Your March 31st statements are not going to show this. You're going to want to look at your month to date Again. Maybe just take a deep breath before you open that up, because I will say that between Thursday and Friday so April 3rd and 4th, if you're listening to this later on, the market dropped just under 10%. So 10% is considered a market correction. And in two days the market dropped. When I say the market, the S&P 500, so the, you know a common indice that we look at. Not necessarily your portfolio could be more or less depending on what's in there, but that is that 10% is considered a market correction. If we were to have a bear market, that would mean 20% off the market high which was in February. I'm not saying we're going to a bear market. But what I am saying is this could be a short-term correction similar to what we saw in COVID. You know, in March of 2020, market dropped off about 30% a little over 30% in one month, and that was scary to many investors.

Speaker 3:

But what I will say is I want you to figure out was my investment too aggressive? You know we have 100% equity and maybe you shouldn't have been 100% equity, so I want you to figure that out, and if you don't know how to figure that out, then that's when you call in a professional. But what you can figure out is this money that I have invested that has now lost some. Was this long-term money, like retirement or even, you know, five years plus out, or is this something that I need to live off of, like all of it, in the next six months to a year? Because those are two very different things. As far as what do I do now? Because I mean, even as we are recording this, the market is up today, but I think we're going to see volatility up days, down days. In the end, long term, five years out, we will be fine. I believe it could even be fine by the end of the year. This kind of volatility is not unprecedented and the market tends to overreact. So what happens is, if the market overreacts and then you overreact and pull out all your investments and go to cash, you're going to miss out on the recovery. So we don't recommend doing that. But I do feel like if you were down 8% to 10% which is very likely right now when you look at your month to date for April If you're down another 10% from here, are you either going to not have money that you need to use in the short term or are you going to just pull out and say I can't take volatility in this market and just pull out.

Speaker 3:

At that point you may want to consider taking some money off the table. If it's not retirement assets, if it's stuff like again earmarked for something you need to purchase a home right now and post-divorce, you may need to take some money out of the market. Do not take all of it. Just move what should be short-term to cash and what you truly need, do not cash out your long-term investments. So really, that comes down to like reevaluating your time horizon. Is this three to five-year money, five to ten-year money, or is this like oh shoot, this money should have been in cash anyway. Right, if I'm using it in the next 12 to 18 months, what does it mean taking an income from the portfolio? If you're taking a monthly, like from an investment account, say two $3,000 a month, you can continue to take your monthly investment or, excuse me, monthly income from your investment. I'm talking about pulling out, you know, chunks of money that were earmarked for something, so what?

Melissa:

I'm hearing you say is that now is a great opportunity for people to assess their risk tolerance. So people that have been saying I want you know the market's up 20 percent, I want to be participating with all of that they sometimes forget that it's very scary. If you are invested 100% in the stock market. That's maybe too much risk for you. So now is a great time to meet with a financial advisor if you haven't done that in the past. I'm going to also point out something that many of my clients right now are looking at walking into a cash settlement. They're getting a lump sum of money.

Melissa:

I had a call from a client who has a big CD coming due. I don't know what I should do. Should I just reinvest it in another CD? And I want to talk a little bit with you about buying on sale versus buying at a premium and what that concept would look like for someone who is new to investing their money. And that's suggesting, of course, that everything, if you have a big lump sum, that you would put the entire amount in the stock market. But let's talk a little bit about pricing and when things are priced low versus when they're priced high in the market.

Speaker 3:

Yeah, I'm so glad you brought that up, jackie, because I actually have an example and maybe you can link. In the show notes there's a piece that really does a great job explaining how to take advantage of buying in when the market is down Now. So if you have a lump sum of cash let's just say, for example, you got a lump sum of cash at the end of 2024 and the market was ripping right, it was doing so well, your natural reaction would be like, okay, I need to invest this money because the market is making money. And now that the market is, you know, toying with this correction territory of down 10%, it's like, oh, I need to put it in safety, I need to put it in cash. But in actuality, it would be a better investment to invest today, when the market is down 10%, than it would have been at the end of 2024.

Speaker 3:

And that goes against every natural human reaction in your body. But it is. It is a better time now than it was then. A question that we don't know the answer, nobody knows the answer to is are we going to go down from here? Right, you know, six months from now, is the market going to be up or down. If I had that answer, I would not be on this podcast, because I would probably be on television talking about it and how I know this for sure Exactly.

Speaker 3:

I mean, everybody would want you know that information. What I can say, though, is these kinds of not even corrections were not there yet, but market volatility is normal and to be expected, and if you, the best thing to do is to invest money and let it sit, keep it invested through all the different markets, right? So the next best thing to do is, if you have cash, you buy when things are on sale. Now they could go on sale more from here, right? I mean, just think about it in terms of shopping, if you're like, okay, well, I really wanted to buy this dress from JCrew, but I thought $125 was pretty steep for one dress. Well, it's on sale now for $75. But what happens if it goes on clearance next month? Will they still have my size? I don't know. The only thing you can say is it's better now.

Speaker 3:

This is long-term money. We know that, over time, investments grow, even with short-term volatility and pullbacks. I'm going to share a quick example again. I hope you can link in the show notes. I'll send you a link. This is from a piece called Beyond Investment Illusions by Hartford Funds and I, back in the day, I used to use this piece back in 08 and 09, and it is still true today. They have updated it through 2024.

Speaker 3:

But if you were to take $10,000 and invest it in the S&P in 1985 through the end of 2024, your $10,000 would have grown to $859,749. That's without taking any money out, adding any money in, and that is including market. You know major market sell-offs right. So we had in there, we had the dot-com situation, we had the great financial crisis, which for many investors is still, you know, like that's what they're comparing everything to and then we had bid in there and all the days of the market you just stayed invested. That is an absolute great return on your investment. If you were to be what we would call an opportunistic investor, which is, every time over that time period you invested an additional $2,000. Every time the market dropped off 8% or more. So that would be what you know we can consider.

Melissa:

Buying on sale. Buying on sale.

Speaker 3:

Buying on sale, yes, buying the dips, right, you've heard that term before. So over that time period between 1984, which, by the way, jackie, like for me, that seems like so long ago Because it was, I'm like I remember 84 vaguely, I was like five years old, but anyway, if you think about if you're 50 years old, that's, you know, 50 to age 90, that's really what we look at in financial planning of your time horizon. So that's a very realistic timeframe that your money could grow between now and 90 if you're 50 years old. So anyway, if we look at those 18 times, the market dropped 8% or more and you invested an additional $2,000. So over that time frame, you invested an additional $36,000. Your ending value at the end of 2024, instead of being $859,749, was $1.447,475 million. So $36,000 made you an additional $587,000 in change. Wow.

Melissa:

So that is such a crucial point here, and I think again, you say that it's counterintuitive that we don't want to throw money at the market when the market is down. But if we buy things and we think about it in a more financially astute way, if we buy things like a dress or a couch, or we're looking for the sale, we're looking to buy when it's down. Nobody wants to buy something at a premium, so this is the most you're going to pay for this dress, Don't you want it? You know, intuitively, the answer to that is no. So I think that if we try to take the emotion out of investing which is very difficult for anyone to do but if we try to take the emotion out and look at the things that we can control, like investing in a dip, if we have cash, that's long-term money, being in control of our risk tolerance If you can't stand this kind of a dip, you have to take a look and see is your portfolio too risky for you? Those are the things that you can control.

Speaker 3:

Is there anything else that you can think of? That would be something that people can do right now to take some control and not feel like they're, you know, just being swayed by market turbulence, sure Well. So obviously, hindsight's, 20-20. If you're feeling like you know I'm not going to sell out, but I really, you know, I was ignoring my finances or, again, I didn't have control over them because I was in the divorce process and couldn't reallocate to my risk tolerance. There are things you can do, and we're doing here with our client portfolios, to prepare for possibly more downturn as a result of these tariffs.

Speaker 3:

If this doesn't go according to plan, the one thing you can do is make sure your portfolio is diversified. So if you haven't rebalanced your portfolio, you are probably very heavy in large cap growth and areas of you know TAC. You may want to look at large cap value. So we have taken some risk off and meaning some of the things that have done really really well over the last few years and bought more large value, dividend paying, consumer staples, those types of things. Those companies have actually held up really well. I'm looking at some of my clients that have some individual stocks so, again, I'm not going to give any specific stock advice, but again, companies who tend to hold up well in all market environments. So if we were to have a longer, prolonged downturn, if these tariffs are implemented longer term and we see prices rising and possibly a recession or a bear market, what are some things you can do your portfolio so that you will stay invested, or more likely to stay invested and have less downside? One thing would be if you're 100% equity, you may wanna to add a component of bonds to that portfolio. So not selling to cash, but adding some fixed income that offers stability to the portfolio. The other thing you may want to do is again that large cap value if you're overweight, and large growth, which you will be if you haven't rebalanced. Growth, which you will be if you haven't rebalanced. And then you know even some.

Speaker 3:

I'm just trying to think here. So like if you were to take even a portion, say, you're just feeling nervous and you're saying, like if the market recovers quickly, I'm okay, missing some of that recovery, I would rather have that protection for the downside. If we see another 10% down from here, then you can add some money, market or short duration, something not quite cash, something that's going to keep up a little bit with inflation more so than you know in your you know shoebox under your bed or your mattress, or a savings account, even at the bank. But again, just kind of taking risk off and having more conservative investments now is better than selling out. But the best thing to do if you have been working with an advisor or you did a risk tolerance questionnaire and this is long term money that you can't touch till retirement is just leave it. And I know I said evaluate, you know kind of look at the damage over the last week. But if you know that your account was diversified, that you have the cash that you need for the short term for the next, you know, 12 to 18 months, and that you were properly invested for your risk tolerance, then don't open your statement, turn off the news, whichever news source you get your news from.

Speaker 3:

Read a book, get some fresh air, snuggle your dog, do things that are gonna like, help you not feel the anxiety, because both the market and us as humans tend to have this fear of what could go wrong or what the worst case scenario would be, and I love this quote by Mark Twain it's fear is interest paid on debt you may not owe so, to sit back Love that I know, that's one of my. I mean I, and trust me, do as I say, not as I do, because I am, you know, pre-menopausal. I lay awake at night staring at the ceiling, thinking of all the worst case scenarios with my teenagers every night. So I have to remind myself of this as well. But I don't worry about the market because I know, historically, we have come back from unprecedented things right, global pandemics, and remember. I always think back to remember what we thought the world was going to end, or like computers were going to stop working when the date changed to 2000. I mean, how scary was that? Yeah.

Melissa:

Y2K, y2k, fear. There were people whose whole jobs were programming for Y2K. So yes, that was, and the world did not stop.

Speaker 3:

So fear is very real and fear of like nobody's going to be our trading partner, nobody's going to trust the United States. Again the dollar is going to lose out, like those things yes, they're possible, we one can't control them, we are not in control but also like, again stepping back and really thinking about the reason I want to, you know, make these emotional moves with my investments. Are they realistic because I need this money now, or is this fear of what could happen and then you know it possibly not being there in 10, 15 years when I need it? And that really becomes less and less probable if we look at the history of the market. So I really think again, get some fresh air, turn off the news source, no matter which source you're getting it from, and maybe read a book instead of scrolling in bed at night, and I hope to take this advice myself.

Melissa:

Thank you so much, melissa. This was amazing advice, and I'm going to send this episode out to everyone that has reached out to me and said that they didn't know what to do because you have explained it perfectly. So thank you.

Speaker 3:

Oh, thank you so much, jackie. I really appreciate it and I love being on your podcast. It is the one podcast that I get every week and listen to religiously when I get a new episode and just keep up the good work, because you do such a good service for people going through divorce.

Jacki:

Thank you, Thank you so much for taking time out of your day to listen to Divorce Rich Podcast. If you like this podcast, please follow us on Apple or anywhere that you download podcasts and share this link with any friends or family that you think might benefit from this information.

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