Stephen Callahan, Trading Behavior Specialist at Firstrade, represents an online brokerage that provides self-directed investors with access to a wide range of financial products, including stocks, ETFs, options, and mutual funds. Firstrade is designed to cater to both new and experienced investors. The platform also offers educational resources, a mobile app, and advanced trading tools, making it a competitive choice for individuals seeking low-cost investment options without sacrificing functionality.
We discussed his views on trading in such a volatile market.
How have the March 2025 tariffs affected market volatility, and what does this mean for retail traders?
Over the past week or so, we’ve seen the markets drop, rally back and drop again. This roller coaster will keep retail traders on their toes, ready to pivot. For retail traders, this kind of volatility presents both new risks and opportunities, as it requires them to stay nimble, ready to pivot their strategies quickly based on new developments.
What trends have you observed in retail investor sentiment since the tariffs were enacted? Are traders becoming more cautious or opportunistic?
There has been a spike up in bond trading. We’re also observing client’s trading options with short term expirations. The sense I get is that our clients are a mixed bag. Some opportunistic short term, but cautious long term. This split reflects the broader market uncertainty, where traders are balancing risk and reward in real-time.
Are there specific behavioral patterns among retail traders that emerge during times of economic uncertainty like this?
During periods of heightened uncertainty, retail traders tend to become more reactive to market and political news, often adjusting their strategies in real-time. Additionally, retail traders tend to closely monitor economic indicators like interest rates, inflation data, and corporate earnings for any signs that could signal the market’s next move. Successful retail traders during times of economic uncertainty are those who remain flexible and disciplined while managing their risk exposure.
How does increased volatility affect trading strategies for retail investors using platforms like Firstrade?
As volatility like this creates both opportunities and challenges for retail traders, platforms like Firstrade serve as a great resource, providing helpful tools and insights. For example, Firstrade offers a wealth of resources, including research reports and educational webinars that aim to help retail traders make informed decisions about their investments. Staying informed and having a clear strategy in place can help retail traders turn volatile conditions like this from a threat into an advantage.
Which stock market sectors have been the most impacted by the current trade tensions, and how are retail traders responding?
Industries like construction and housing, which rely on building materials from Canada and Mexico, feel the effects of tariffs. It’s expected that we will continue to see more back-and-forth between countries as trade policy evolves, potentially leading to additional market volatility. Retail traders may use tools commonly associated with bearish strategies, such as hedging, short positions, or put options. There are also ETFs that are long or short on a sector. Either way, investors need to be more agile this time around, given the swift decisions made by the Trump Administration.
For retail traders heavily invested in tariff-affected industries like agriculture or automotive, what adjustments should they consider?
Retail traders should do everything they can to stay informed as trade policies continue to evolve. When sectors like automotive and agriculture are impacted by fluctuating tariffs, along with other traditional factors that can shift momentum, it’s crucial to be prepared to react and make necessary adjustments. Given the swift nature of tariffs and how quickly leaders are moving to respond, it’s important for retail traders to stay ahead and avoid being left behind. For those who are active traders, staying up to date with the latest news is essential.
Are there any unexpected sectors that have benefitted from the tariffs or the resulting market shifts?
Despite the negative impact on many sectors, software and cloud computing companies face fewer trade barriers. Also, good companies coming off of a successful run that are now trading down may be opportunities to “buy the dip” in case you feel that you missed out during the bull market last fall. As these market shifts occur, it’s expected that different industries are going to feel the impact of tariffs uniquely.
Have you noticed traders shifting their focus to specific asset classes (e.g., commodities, bonds, or ETFs) as a hedge against tariff-driven risks?
I expect the trends we saw last week to continue. We experienced a spike in fixed income trading, and from what I’ve observed, trading in short-term options has increased as well. This shift suggests that traders are moving away from an overall bullish market view to one of concern. They’re seeking protection in fixed incomes, and for those who are more active, short-term options have become attractive for investors looking to navigate the choppy waters of volatility. I anticipate we’ll see more of this, and possibly, more investors may move toward what’s considered safer assets.
What risk management strategies do you recommend for retail traders facing a highly uncertain market due to tariffs?
From a risk management perspective , avoid trading on impulse. The landscape is changing from day to day. Don’t panic buy or sell. Think long term as well as short. In terms of portfolio, diversifying asset classes is a helpful way to decrease risk in an uncertain market as well. Investors can reduce risk associated with specific industries or markets by spreading their investments across a variety of sectors. These could act as a hedge during market volatility and periods of inflation, as well. Additionally, keeping investments domestic can also decrease the greater impact of the tariffs.
What are some key lessons that retail traders can learn from past trade disputes when structuring their portfolios today?
Veteran traders are more likely to keep things in perspective. It’s understandable to react to short-term volatility, but it’s important not to stray too far from the strategy you’re comfortable with. Retail traders today can look at past events—whether it be the pandemic, Y2K, or the dot-com boom—and learn from them. Do your research to identify which strategies have stood the test of time to ensure you’re prepared for potential disruptions. For those with a long-term perspective, such as retirement investors, remember your timeline and don’t let short-term volatility shake your confidence.
Thank you for the great interview, readers who wish to learn more should visit Firstrade.