President Donald Trump shocked observers by rolling out highly aggressive tariffs on virtually every other nation around the globe during his “Liberation Day” announcement at the White House on Wednesday.
The tariff levels far exceeded what may have been expected and worked out, according to estimates from several sources, to an average rate of 29%—a levy the U.S. has not imposed in nearly a century. Those included an additional 34% tariff on China, a 24% tariff on Japan and a 20% tariff on the European Union.
The move has sent shockwaves through global equities and bond markets. In the U.S. alone, as of 2 p.m. Thursday, the Nasdaq was down over 5%, the S&P 500 more than 4% and the Dow shed over 3%. Yields on 10-year treasuries stand at around 4%, and the VIX, which measures volatility, is up more than 31%.
Advisor investment strategies are generally geared toward long-term horizons and most caution against panic buying and selling. That remains true in response to the tariff moves. However, many investment committees and chief investment officers at advisory firms have sent clients notes with further advice on navigating the current turmoil.
“We believe that investors in high quality, globally diversified portfolios should stay the course despite the potential for further price deterioration,” wrote Gary Quinzel, vice president, portfolio consulting at Wealth Enhancement. “Timing the market is nearly impossible and the market often swings wildly when uncertainty is this high. Missing just a few large ‘up days’ can have a meaningful impact on long term performance.”
Carson Group Chief Market Strategist Ryan Detrick, however, sees some opportunities amid the current market tumult.
“As bad as it feels, there are some positives out there and that is important for advisors to remind clients,” Detrick wrote. “Bonds are having a great year and finally providing some zig with stocks zag to help investors sleep at night. Not to mention after two amazing years, the U.S. is taking a step back, but the majority of global markets are still up nicely on the year, reminding everyone why it is so important to stay diversified and not just chase the latest strong sector or shiny object.”
Merrill Lynch Chief Investment Officer Chris Hyzy also preached patience in a note to investors.
“Given the current high level of uncertainty and the significant potential for change based on new deals, negotiations, and/ or targeted adjustments, it is important to let the volatility settle down, and at the same time, prepare a plan to act on as the dark gray clouds fade away,” Hyzy wrote. ” In the coming weeks we favor a defensive approach that advocates allowing cashflow to build and to increasing positions where appropriate in more insulated sectors such as utilities and low volatility, high-quality exposure overall.”
One factor at play is that the Trump administration has exhibited a pattern of announcing aggressive tariffs only to immediately scale them back or postpone them. So, one piece of advice is to wait and see if the numbers initially announced are indeed what will be implemented or, if they are, for how long.
“Once again, the president appears to be using a tariff announcement as a negotiating tactic in hopes of achieving a reduction in tariffs implemented by foreign countries, leading to better trade deals,” wrote Chris Fasciano, chief market strategist at Commonwealth Financial Network. “Until the end game is understood, uncertainty will run high. This is true for consumers making spending decisions, companies making capital project decisions, and investors making allocation decisions.”
Fasciano added that Commonwealth will watch how other countries respond—whether they negotiate or retaliate. In the meantime, “In situations like this, investors’ immediate reaction is to sell first and ask questions later. But doing so creates opportunities for long-term investors. Now is the time to look for those opportunities in global equity markets and the bond market.”
In addition, he advised to rebalance portfolios if they become misaligned with long-term goals and to seek diversification. “It has been working so far this year, and we anticipate it will continue to do,” Fasciano wrote. “History indicates that in times like this quality factors tend to outperform. Bonds are also a helpful part of portfolios because they tend to provide ballast during equity turmoil.”
That advice is similar to what Callan Family Office wrote in a note distributed to clients.
“One pillar of our approach is to not let emotions override our decision-making, and markets right now are moving more off guesswork and speculation,” according to the note. “Further, our advocacy of diversification should show its merits today, particularly for those with bond allocations benefitting from lower yields. We also routinely use these moments to tax loss harvest and will do so again during this turbulence. These are our investing constants.”
Meanwhile, Michael Rosen, chief investment officer at Angeles Investments, in a note to investors, wrote, “The global economic system that pulled billions out of poverty, created new technologies that transformed nearly every facet of life in countless ways, was designed and led by the United States. The world’s prosperity has not been a zero-sum game, whereby gains for one country can come only from the losses of others. The global economic system, underpinned by the U.S. dollar as its reserve currency, solidified US economic dominance for generations while also producing wealth for every country that joined the U.S.-led framework. Apparently, we now want to blow all this up.”
Jeff Muscatello, vice president and research analyst, Douglass Winthrop Advisors, a New York City-based registered investment advisor, observed that companies with “stretched valuations are coming back to earth as risk assets are repriced.”
“In this environment, equity investors should stay anchored in quality businesses trading at reasonable valuations. The market is rightfully penalizing companies that lack one—or both—of those characteristics,” Muscatello wrote. “This is a real test for investors who claim to have a long-term focus…. The market is exposing those who drifted from that discipline, and that dislocation could create opportunities for patient investors. We’re actively re-prioritizing our watchlist as opportunities present themselves.”
Peter Krull, partner and director of sustainable investing at Earth Equity Advisors, an independent RIA, also questioned the tariffs’ ability to achieve their stated goals.
“These tariffs are supposedly designed to bring manufacturing back into the U.S., and to raise revenue to pay for tax cuts. It’s unlikely to do either,” Krull wrote. “We rebalanced our fund portfolios this week with the possibility of tariffs in mind. Obviously, our more aggressive portfolios with higher allocations to stocks are going to be the most volatile. We’re keeping a close eye on markets, and continue to identify less-volatile alternatives and will use them where appropriate.”
This is a developing story. We will update it with additional comments from advisors as we receive them.