“Every Storm Runs out of Rain”
As you all know by now, this past week, President Trump announced sweeping tariffs that mark a significant shift in global trade policy. These tariffs were much worse than many expected. President Trump introduced a baseline 10% tariff on all imports along with reciprocal tariffs targeting countries with perceived barriers to U.S. trade. These measures, which include rates as high as 34% for China, 32% for Taiwan and 24% for Japan, have disrupted a trading system that has been in place for many decades. This policy move is aimed at boosting domestic manufacturing and addressing trade imbalances, but in doing so, has sparked widespread criticism and uncertainty.
Reactions
The tariffs triggered strong responses from both domestic and international leaders. The European Union, facing a 20% tariff, warned of “serious repercussions” and pledged collective countermeasures if negotiations fail. China, subjected to a 34% tariff, announced plans for “determined countermeasures” to protect its interests. Other nations like Japan, South Korea, and Taiwan expressed disappointment and are exploring strategies to mitigate the impact. Canada, though exempt from the new reciprocal tariffs, vowed to retaliate against existing duties on its goods.
Financial markets reacted swiftly to the announcement. US stocks were hit the hardest, but all markets were affected. Those countries focused on supplying the United States with consumer goods and technology products felt the most pain. On the other hand, the bond market acted as it should during times of stock market uncertainty and saw prices increase as investors looked for safety.
What to do now
Periods of market volatility like this can be unsettling, but it’s important to remember that your portfolio is designed to withstand shocks like these. While equity markets are under pressure, diversification has proven its value. Fixed-income investments, such as bonds, have provided much needed stability and income. International stocks in regions less affected by the tariffs have shown relative resilience, offering opportunities for balanced returns. And our focus on high-quality US equity investments remains critical during times of uncertainty like this. Focusing on companies with strong balance sheets, higher cash flows, lower levels of debt and companies that tend to pay dividends tend to be better equipped at navigating economic disruptions and tend to recover more quickly when conditions stabilize.
Actions we’re taking
As we move forward and through this market turbulence, our investment team is using this as an opening. Market volatility often creates opportunities to invest in high-quality companies at attractive valuations. We are carefully assessing these opportunities while staying true to our discipline and approach.
We also continue to preach the value of diversification now more than ever. By spreading investments across asset classes and regions, we aim to reduce risk and enhance portfolio resilience against further market disruptions. We will continue to build client portfolios with this in mind.
Lastly, we will continue to monitor policy developments. The trajectory of this trade conflict will depend heavily on future actions by policymakers. We will continue to track negotiations and potential retaliatory measures from other countries and do our best to anticipate how markets will react.
It is very important that we remain disciplined and focused on our long-term objective to get through the short-term volatility. As Maya Angelou once said, “Every storm runs out of rain”. While uncertainty remains high, history shows that markets often rebound strongly after periods of decline. Our disciplined approach will help us capitalize on the long-term growth opportunities created by this volatility. As always, we are here to guide you through this challenging time. If you have any questions or concerns about your investments, please don’t hesitate to reach out.