With President Trump’s new tariff policies announced on April 2, market volatility has increased sharply, raising questions about their long-term impact. We want to provide insights into how these changes may affect investors and financial markets. While the long-term implications remain uncertain, we believe it is important to focus on key takeaways that may impact portfolios and investment strategies. 

Key Market Considerations 

• Uncertainty remains the biggest risk. Markets thrive on predictability, and the ambiguity surrounding these tariffs—whether they are a negotiating tool or a long-term policy shift—is a key driver of volatility. 

• Economic deceleration concerns. The imposition of broad-based tariffs has raised concerns about slowing economic growth, with some analysts suggesting a potential increase in the odds of a recession in the near term. 

• Potential stagflationary effects.  Inflation in a slowing economy is known as “stagflation”.  While higher costs could lead to inflation, strong consumer demand and corporate adaptability may help mitigate stagflation risks. 

What Investors Should Keep in Mind 

• Long-term perspective is key. Market disruptions caused by short-term policy decisions should not deter investors from maintaining a well-diversified and disciplined investment strategy. 

• Diversification matters. Exposure to alternative asset classes like real estate and private lending can help provide stability during volatile periods.  Bond investments  are particularly helpful during market volatility. 

• Recession is not a given. Despite market fluctuations, economic fundamentals remain resilient, and we continue to see opportunities for growth in U.S. and international equities. 

Breaking Down the April 2 Tariffs 

• A universal 10% tariff applies to most imports, with significantly higher rates for key trading partners (e.g., China 34%, European Union 20%, Vietnam 46%). 

• A 25% tariff has been placed on imported automobiles. 

• Immediate market reactions included declines in equities and energy futures, a dip in U.S. 10-year Treasury yields, and an increase in gold prices.  This could lead to a decrease in mortgage interest rates. 

Implications for Investors 

• The ultimate economic impact of these tariffs will depend on how costs are distributed across corporations, supply chains, and consumers. 

• Supply chain disruptions could lead to reduced earnings for companies, affecting corporate profits and hiring decisions. For instance, businesses that rely on imported raw materials may see higher costs, which could pressure earnings and lead to shifts in pricing strategies. 

• Inflationary pressures may rise if consumers bear the brunt of increased import costs. 

• Portfolio positioning should focus on risk management, diversification, and maintaining a long-term outlook. 

Our Guidance