On Tuesday April 1 I wrote on my blog post that, “The prospect of tariffs has put the global order into a state of uncertainty and the markets do not like uncertainty.” Little did I know that the markets would react in such a violent and volatile way!
Last week global markets fell into chaos with the S&P 500 (IVV) down -9.1%, U.S. small cap down (SCHA) -9.8%, developed international markets (SCHF) down -8.6% and emerging markets down (SCHE) -7.0%. Core bonds (AGG) were a bit of a cushion being up +1.1%, but that was not nearly enough to provide any kind of meaningful offset to a diversified portfolio. Likewise, gold (GLD), sometimes considered a safe haven, was down -1.5%.
All the talking heads have a view of where we go from here and the consensus seems be in the “negative” camp. Some are looking for Trump to roll-back the tariff proposal to secure a safe landing while others see Trump as “inflexible” leading to more uncertainty. In any event, one commentator (from Natixis) was clever in saying, “Can’t put the toothpaste back in the tube. Good luck pricing that in.” In other words, the damage has been done and will be very, very difficult to recover from!
For clients with long-term strategies, now is not the time to de-risk. Reacting to a downturn by exiting risk assets only locks in losses and hampers a portfolio’s ability to rebound. It’s worth remembering that many large-cap U.S. companies—especially in the tech sector—have exceptional balance sheets, resilient earnings, and the potential to emerge even stronger as AI and other innovations take hold.
Where will the market go from here? As I am wont to say, “Beats Me!” But I am confident that the economy and markets will evolve and adapt and recover over time.