Market Update – Selloffs, Tariffs and Trade Oh My

Market Update – Selloffs, Tariffs and Trade – In the past few days, the market has seen some significant shifts, leading to questions, concerns, and even some fear. If you’ve been feeling uneasy, you’re not alone. To help put things into perspective, I’ve gathered some insights from several of our portfolio managers to shed light on what’s happening and how we’re handling it. Whether you’re already a client or not, this update should give you clarity during this time of market uncertainty.

Understanding the Pullback

The S&P 500 is down ~17% since its peak in February. As highlighted, pullbacks of this magnitude are quite common, with average calendar year drawdowns of ~15% and declines >15% happening every 2-3 years. 

Despite this level of volatility, equities have still generated attractive low-double-digit % returns per calendar year over time. 

* based on calendar year data since 1989.

In fact, in our last quarterly update from United Asset Management and on the Annual State of the Union, we discussed the possibility of market volatility. 

After two years of impressive gains (20% or more), the market had become overvalued, especially certain sectors. We anticipated volatility, because of that and the upcoming policy changes. So, while this downturn might be jarring, it’s not entirely unexpected.

 Our team had already taken steps to adjust portfolios accordingly, adding more defensive positions to help weather this storm.

The Impact of Tariffs and Trade Policy

One major factor contributing to the current volatility is the announcement of new tariffs. While this has caused a lot of headlines and speculation, it’s important to understand the rationale behind these moves. One of our portfolio managers shared some insights that I think are worth considering.

With this market selloff, the big question amongst investors and clients has been: “why is Trump doing this?”, On a few research calls some possible reasons are emerging:

• Force Congress to Act: Drive the speed and size of the “big beautiful” tax bill. Most pundits expected negotiations on the tax bill, which will provide fiscal stimulus, to start in earnest this summer with a year-end timeline for completion. Trump is forcing Republicans in Congress to accelerate that timeline. In fact, the Senate and House GOP committees have gotten first drafts complete. While there is much reconciliation left in the process, nothing moves Congress faster than a crisis, even one created by this administration. His goal is to get GOP unity in both chambers of Congress. I am reminded of the 2008 stimulus package, which failed, the market tanked, and then a day or so later the votes emerged. This steep market decline may be the push Congress needs to get the tax bill over the finish line faster and bigger than previously expected.
• Force the Fed to Act: The Fed has a dual mandate, but the focus on their attention has been on the inflation part of that mandate, especially after being late to the game when inflationary pressures started to post-pandemic. President Trump has been more vocal in recent days that rates are too high and that the Fed needs to act now to lower rates. While Chair Powell’s comments on Friday didn’t provide any hints that rate cuts are imminent, they are taking note that every economist on Wall Street has meaningfully increased their odds of a recession over the past week alone. For example, Strategas has moved to 45% chance of recession in 2025 in recent days, and their economist said last night that this goes to 100% in the next few months if there is no monetary (Fed) or fiscal (Congress) response to these tariffs. In effect, Trump is forcing the hand of the Fed. 
• Force Trade Partners to Act: The Trump administration knows that these tariffs will bring our trade partners to the table, as they are very onerous on their economies and many of these countries (like Vietnam, Canada, Mexico, etc) rely heavily on US consumers. Trump’s team claims that 50 such countries have called and offered to discuss terms of a negotiation. This process will take time.

Bottom line, one can see the rationale for Trump’s sledgehammer approach, ala the art of the deal. This is creating alot of uncertainty and carries meaningful risk, but there does appear to be a rationale. 

Positive Signs Amidst the Chaos

Despite the negative headlines dominating the news, there are signs of growth and resilience in the economy. For instance, companies like Nissan and General Motors are ramping up production in the U.S., and other companies like Guardian Bikes are expanding their U.S. operations. These are signs that, despite the uncertainty, American businesses are continuing to grow, attracting more investment, and creating jobs.

Additionally, organizations like the Coalition for a Prosperous America are backing President Trump’s tariff policies, believing they’ll help reset global trade and protect American manufacturing. While there’s risk involved, these policies could lead to long-term economic benefits, especially in sectors like agriculture and manufacturing.

What Are We Doing to Protect Your Portfolio?

Now, you might be wondering, “What does this mean for my portfolio?” Our team has been actively monitoring the situation and making strategic changes to reduce risk. We’ve already shifted some portfolios towards more defensive stocks, raised cash positions, and repositioned holdings to protect against further market declines.

Our portfolio managers have been proactive, not reactive. They’ve been adjusting the portfolio mix based on our assessment of the market’s overvalued sectors. This now includes harvesting losses to offset gains for tax planning purposes and hedging larger positions to limit further downside.

If you’re a client with us, rest assured that your portfolio is in good hands. We’re not sitting back and waiting for the market to recover on its own. Our team is actively managing risk while looking for opportunities ensuring that your investments are positioned for both short-term and long-term success.

What Should You Do?

If your portfolio is managed by our team, you don’t need to panic. We’ve already made adjustments, and we’ll continue to monitor and adapt to the market conditions. However, if you’re feeling uncertain, don’t hesitate to reach out. We’re always here to talk and can schedule a call with one of our portfolio managers to walk through what’s happening and answer any questions.

If you’re drawing income from your portfolio, it’s important to note that your retirement income doesn’t need to change. The volatility in the market doesn’t mean you need to reduce the income you’re taking. We’ve built strategies to ensure your income remains stable, even in turbulent times.

I just heard of a big firm that sent messages to their clients that if they were taking 4$ income, now they should drop to 3%. WHAT?!?!

Who wants to reduced their income or change their lifestyle due to market volatility? NO ONE

This is a HUGE red flag to me, they are not managing your portfolio with YOU in mind. We address this and how we handle retirement income on in our Retirement Shift post.

Green Money: What You Need to Know

It’s also worth noting that if you have “green money”—funds in safe, protected growth vehicles like annuities—this volatility won’t affect your accounts. These funds aren’t subject to market swings, so even if the market drops, your green money remains secure. You won’t experience losses, and your returns are based on fixed anniversaries, not daily market fluctuations.

What If Your Money Is Managed Elsewhere?

If your portfolio is being managed by someone else, it’s essential to avoid making emotional, knee-jerk decisions during times like this. However, it is important to take the time to ensure that your portfolio is positioned to weather this storm.

A risk assessment can help you understand how much risk your portfolio is exposed to, how it is positioned and whether adjustments need to be made. This doesn’t mean you need to sell everything or make drastic changes, but it’s important to ensure your portfolio is designed to handle market volatility and position you for future growth.

I am reminded of stories of Paul’s missionary journeys in Acts. You are probably thinking what is this girl smoking, but stay with me. There were lots of times that Paul took voyages by sea and the writer would talk about the sailors wanting to reach certain ports to wait out the winter or weather the storm. Some ports were positioned better that others for weathering out a storm. 

The same is true for your portfolio. There are good and bad ways to weather this volatility storm. 

I heard another advisor statement this week that made me cringe. The client had asked them multiple times for a review meeting. When they finally agree to meet, they told her that her portfolio was meeting THEIR expectations. EXCUSE ME?! Their expectations? It is not their money, it’s hers. Shouldn’t they be sure it is meeting HER expectations and HER needs?

This is why all of our planning starts with YOU, what YOU want and why we talk about your personal benchmark so we are managing to meet your needs and meet your expectations.

In Conclusion

Market volatility is a normal part of investing, but that doesn’t mean it’s easy to handle. The key is having a well-thought-out plan in place and working with a team that’s actively managing your investments. If you’re a client of ours, you can rest easy knowing that we’re monitoring the situation closely and making the necessary adjustments to protect your portfolio.

If you’re not yet a client, now is the perfect time to schedule a review or risk assessment to ensure your portfolio is positioned for the long-term. As always, we’re here to answer your questions and provide guidance as you navigate this turbulent market.

Feel free to reach out at any time, and we’ll be happy to assist you.