Investopedia's chief editor says stock market fears may be overdone: 'The smoke is a lot worse than the fire'

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Investors have been eyeing the stock market with an abundance of caution in the wake of the Trump administration’s back-and-forth trade policies and the corresponding stock market volatility.

“The past few months have put us on an emotional roller coaster, right?” Investopedia chief editor Caleb Silver said on Yahoo Finance’s Financial Freestyle, referring to the volatility in early April resulting from Trump’s initial “Liberation Day” tariff announcements. “We’ve gone from pretty optimistic with the stock market at all-time highs, not really understanding that the entire economy was going to be flipped on its head, to, ‘Oh my gosh, the stock market’s down 19%. Should I stay? Should I go?'”

Investopedia regularly surveys its 1.5 million newsletter readers about their investing habits to get a feel for what moves are being made by investors of different demographics. Silver noted that younger generations are more ready to take risks and aren’t as afraid of stock market volatility, but recent fluctuations have put some middle-aged and older investors on the defensive.

Silver said that some investors’ feelings might be getting the best of them and that the “smoke is a lot worse than the fire” when it comes to the economy. He maintained that giving in to fear and bailing out won’t necessarily protect investors’ money like they hope it will.

Read more here: How to protect your money during economic turmoil, stock market volatility

“We’ve also seen one of the fastest V-shaped recoveries in the stock market in history,” Silver said. “They get faster and faster. These bear markets are very cute. They last like two, three weeks, and then they’re gone. So in the time that you thought, ‘Maybe I should do something,’ the stock market probably already recovered.”

Investopedia’s data from its survey and site traffic, combined with analytics from Vanda Research, showed that a lot of investors have also been trying to pick up shares as they’re falling, buying some popular stocks at the dip even as they’ve been significantly hit.

“If you look at what’s happened over the past few weeks, turns out buying the dip was actually the right call this time around,” Silver said. “We don’t encourage it. We encourage dollar-cost averaging, buying stocks that you like no matter what the price, especially if they fall. But a lot of people got a little risky out there on the plank and may have had some good timing with some of these stocks for now.”

Silver reiterated that things are not as bad as they seem in the economy. Indeed, the latest survey of consumer sentiment from the University of Michigan showed a rebound in optimism for the first time this year after the index recorded one of its lowest readings on record.

“Sometimes the fear and the anxiety and our animal spirits make us think things are a lot worse than they actually are,” Silver said.

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