We're now squarely in a world of stories, emotion and guesswork. Or, as economists call it, radical uncertainty.

Why it matters: The move from the quantifiable world of risk is both enormous and profound.

• We got a glimpse yesterday morning, when the stock market whipsawed, moving more than 8% in half an hour on little more than a rumor about President Trump's state of mind.

The big picture: Economist Frank Knight elucidated the key distinction in his 1921 book "Risk, Uncertainty and Profit."

• Risk, Knight said, applies to situations where different outcomes can be assigned various probabilities, which can then be calculated and priced.
• Uncertainty is where those outcomes cannot be assigned numerical probabilities, but they can still be modeled and analyzed by using stress tests, history, storytelling, scenario analysis, and other tools. This is the world of educated guesses.
• Radical uncertainty, as described in the eponymous 2020 book by by John Kay and Mervyn King, is closer to pure guesswork. It describes a world where we don't have a grasp of what the possible outcomes even are, let alone what kind of probability to assign to each one.

Zoom out: Trump's trade policy is unpredictable, with tariffs announced and changed constantly.

• A world where tariffs on China can go from 10% to 104% in a matter of weeks, despite international trade treaties, is a world where shareholders much prefer stock buybacks and hiked dividends to large-scale capital investments that could end up looking extremely foolish.

Follow the money: Between 9:43am and 10:17am yesterday — a period of 34 minutes — the S&P 500 rose by an astonishing 8.3%, after a murky series of events involving a social media post, erroneous headlines on CNBC and the Reuters wire, and frantic confusion in the market. (Reuters withdrew its story and apologized for the error. CNBC corrected itself on air.)

• In other words, the S&P rose more in 34 minutes in one morning than it did in the first 13 years of this century.
• That kind of volatility is a defining symptom of radical uncertainty, a state of affairs where no one has any conviction about what anything might be worth, or even about what they don't know.
• In such a world, the markets start to behave less like a weighing machine and more like a random number generator.

Between the lines: In a world of radical uncertainty, markets change in important ways.

• Overall valuations are lower, as investors demand a risk premium for risks they can't even name, let alone model.
• Volatility becomes a permanent feature of the market, rather than a temporary aberration.
• Cash allocations rise, as investors wait for that volatility to throw up investing opportunities.

The bottom line: So long as Trump remains president, it seems likely that we'll be living in this state of not knowing, which we only briefly glimpsed during the depths of the pandemic.

It's been an awful stretch for stock market investors who've seen trillions of dollars evaporate after the dramatic sell-off last week.

Why it matters: A majority of Americans hold stocks, including half the private sector workforce, which is saving for retirement through 401(k) investment accounts.

• The number of Americans invested in the stock market has surged in recent years, as pandemic-era gains attracted more entrants and new laws pushed more workers into 401(k)s through auto-enrollment.

Between the lines: The stock market can get very volatile. The recent bout of upheaval has led to a lot of anxiety and questions, particularly for those who may not have experienced this kind of rollercoaster before.

• "People are scared. They're emailing me," says Justin Wolfers, an economist at the University of Michigan who regularly appears on TV news. Folks see him on air and send him a line asking what they should do with their 401(k).

The big picture: This feels bad, but it really doesn't change things for most people, says Stephen Kates, a financial analyst for Bankrate.

• "It's not fun," he says. "A lot of money was lost."
• But your perspective on the latest bout of market shock depends a lot on how close you are to retirement.

If you're five years or more away from retirement, the past few days are part of the risk of investing in the stock market, and there's no need to do much. What you shouldn't do is panic sell, Kates says.

• Ideally, folks are diversified, he notes. That means that not 100% of your money is tied up in stocks, and so your returns haven't take the same hit as the headline numbers are showing.

If you're closer to retirement you might want to consider "rebalancing" your portfolio, or selling some of the bonds you hold and buying into stocks while it's cheap.

• You might want to get some advice from a financial adviser before you monkey around too much.

If you're retired, you should still be in pretty good shape. Someone who retired at the end of 2023 with $600,000 in their 401(k) would expect to withdraw about 4% of that per year, or $2,000 per month.

• If they had a standard 60/40 portfolio, they would have withdrawn $24,000 by the end of 2024, and they would also have had a balance of $654,000 in their account.
• Since then, they would have continued to withdraw their $2,000 every month, and their portfolio would also have declined in value. But as of the close Friday, it would still be worth $601,500, more than they started with.

How it works: Retirement accounts, by their nature, are designed to be long-term investments. If you withdraw about 0.3% per month for living expenses, that leaves the other 99.7% to compound over time.

• Stocks are volatile, and every retirement account will probably see a drawdown of 20% or even 30% at some point.
• That's to be expected. But over the long term, returns to a retirement account are nearly always positive rather than negative.

The bottom line: Don't panic.

The S&P 500 has fallen more than 15% since Trump's inauguration, the worst showing for a new administration since George W. Bush was in office during the dot-com bust.

Why it matters: Trump usually touts stock market performance as an indicator of his success, and in his first term as president, he backed off on policies that sparked market sell-offs.

• But not this time around. Trump has so far doubled down on his tariff moves, even as the stock market has sunk.

By the numbers: Since there was a break between Trump's first stint in the White House and his current term, Axios compared the S&P 500 at the start of Trump 2.0 to other presidents in their first terms in office, including Trump 1.0.

• The market rose a bit during Trump's first time in the Oval Office, rising 4.1%, from inauguration day through April 7.
• It was higher, rising 7.4%, for former President Biden.

Between the lines: When Biden was in office, Trump took credit for stock market gains, and blamed losses on the former president.

• "There are many people that are saying that the only reason the Stock Market is high is because I am leading in all of the Polls, and if I don't win, we will have a CRASH of similar proportions to 1929," he posted during the campaign in May 2024.

The bottom line: That's not quite how it has worked out, so far anyway.