Market Commentary: Tariff Special Edition

Navigating Tariffs & Inflation

INSIGHTS FROM OUR INVESTMENT SOLUTIONS TEAM

Reminder: Your Portfolio Was Built for This

The pilot told us there would be turbulence. He even gave us the timing. We buckled up, trusting he’d keep the ride manageable. But on April 2, we charged straight through — no detour, no softening of the bumps. It was uncomfortable, unpleasant, and – well – scary.

This is how many investors felt during last week’s events. But here’s the important part: just like planes are engineered to withstand turbulence, your portfolio is built with the same resilience in mind — diversified, stress-tested, and constructed for a long-term flight.

The tariffs announced last week were more aggressive than expected and created more uncertainty than we had going into “Liberation Day.”  Overall, these policies are likely to be negative on prices, growth, profits, and the economy. Markets went risk-off around the world but declines were pronounced in the U.S. where markets were concentrated at high valuations. The S&P 500 index entered correction territory and the Nasdaq went into a bear market.

Going forward, the key will be how long and how much. We cannot make these determinations without time – there could be significant changes from here based on negotiations and responses from other countries. Fortunately, we came into this year from a place of strength, with solid U.S. corporate and economic fundamentals that showed incredible resilience through the largest increase in interest rates in a generation. Much of that has been fueled by the power of the U.S. consumer. The journey of interest rate hikes has also gotten us to a place where the Fed has some room to step in should growth begin to meaningfully deteriorate. 

Two Key Takeaways for Clients

1. Market Downturns are Normal.

Since 1980, the S&P 500 Index experienced an average intra-year drop of 14.1%, however annual returns were positive in 34 of 45 years.¹ Keep in mind, we’ve had back-to-back years of 20%+ on the S&P 500, even with the recent decline, the S&P 500 is up 14.8% annualized from December 31, 2023 through April 6, 2025.²

2. Remember that the Plane is Built for Turbulence.

The power of diversification has historically been proven for long term investors . The last 15 years have been difficult with pandemics, natural disasters, wars, and geopolitical events, yet a basic diversified portfolio has achieved an annualized return significantly outperforming cash.³ Staying invested during market volatility is more often than not better than getting out and sitting on the sidelines. 

Sources:

1. J.P. Morgan Asset Management Guide to the Markets. FactSet, Standard & Poor’s. Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2024, over which the average annual return was 10.6%. U.S. Data are as of March 31, 2025.
2. Morningstar Direct.
3. J.P. Morgan Asset Management Guide to the Markets. Bloomberg, FactSet, MSCI, NAREIT, Russell, Standard & Poor’s. Large cap: S&P 500, Small cap: Russell 2000, EM Equity: MSCI EME, DM Equity: MSCI EAFE, Comdty: Bloomberg Commodity Index, High Yield: Bloomberg Global HY Index, Fixed Income: Bloomberg U.S. Aggregate, REITs: NAREIT Equity REIT Index, Cash: Bloomberg 1-3m Treasury. The “Asset Allocation” portfolio assumes the following weights: 25% in the S&P 500, 10% in the Russell 2000, 15% in the MSCI EAFE, 5% in the MSCI EME, 25% in the Bloomberg U.S. Aggregate, 5% in the Bloomberg 1-3m Treasury, 5% in the Bloomberg Global High Yield Index, 5% in the Bloomberg Commodity Index and 5% in the NAREIT Equity REIT Index. Balanced portfolio assumes annual rebalancing. Annualized (Ann.) return and volatility (Vol.) represents period from 12/31/2009 to 12/31/2024. Please see disclosure page at end for index definitions. All data represents total return for stated period. The “Asset Allocation” portfolio is for illustrative purposes only. Past performance is not indicative of future returns. U.S. Data are as of March 31, 2025.

DISCLOSURES:

Past performance is no guarantee of future returns.

The graphs and charts in this commentary are for illustrative purposes only and not indicative of any actual investment. Index returns do not reflect any fees, expenses, or sales charges. Stocks are not guaranteed and have been more volatile than other asset classes. Historical returns were the result of certain market factors and events which may not be repeated in the future. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgement in determining whether investments are appropriate for clients.

The information here is not intended to constitute an investment recommendation or advice.

Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations for the respective strategies are shown gross of fees. If fees were included returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs. Also, since the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index.

This material has been prepared for information and educational purposes and should not be construed as a solicitation for the purchase or sell of any investment. The content is developed from sources believed to be reliable. This information is not intended to be investment, legal or tax advice. Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit or protect against loss in a period of declining values.