Tariffs - Now We Know

Even before recent events, we identified signs of overvaluation in equities and anticipated a market correction. As we've shared before, markets priced to perfection are vulnerable to shifts in Federal Reserve policy, unforeseen events, or economic actions like tariffs. We weren't sure how far President Trump would go with tariffs, but the studies done by several institutions suggested that if he implemented tariffs at the rate he campaigned on, then we could see a significant correction (down 10% or more) or even a bear market (down 20% or more).

 

Now we know! The tariffs outlined yesterday exceeded expectations. Equity markets are now in correction territory and perhaps headed into bear market territory. Volatility has increased significantly, and we don't think that will abate any time soon. How other countries respond in the coming days and weeks will affect where all this is headed, but at this point, is unknown.  

 

Our clients are prepared for this! Thanks to proactive planning, the portfolios we manage are well-positioned. The defensive adjustments we made - reducing stocks and increasing bonds - are paying off. The market dynamics are different now than in 2022 and bonds are providing diversification and positive returns in this volatile environment.

 

This will present opportunities! When you're prepared emotionally and financially for this type of downside volatility, opportunities will present themselves. You just have to ignore fear, focus on fundamentals, and be patient. Opportunities that we are focused on are:

 

 

As Warren Buffett wisely advises, 'Be fearful when others are greedy, and greedy when others are fearful.' And perhaps in today's market, we can adapt a famous saying from Marie Antoinette: 'Let them eat fear'—but only if it propels us toward informed, rational opportunities.