these came in an email to me a while ago.
The new U.S. tariff policies announced last week have driven extreme volatility in the financial markets over the past few days. It is still unknown where tariff policy may settle, as negotiations continue between the U.S. and many other countries.
The risk the markets are mainly suffering from at this time is “headline risk”. This type of risk can drive extreme volatility, but it is typically short-lived. For instance, if we take a look at the movements in the stock market in just a couple of hours today, we have a good example of the impacts of headline risk.
This morning at the open the S&P 500 Index declined 4%, it then rallied 8% on a headline (later proved false) that the Trump administration was putting a 90-day delay on the implementation of reciprocal tariffs on other countries. The S&P 500 Index then declined again by 5%, and then bounced higher by 3%. This all happened in the first two hours of today’s trading session.
However, ultimately, by the end of the trading day, the S&P 500 Index ended up declining a mere 0.2% for the day, and the Nasdaq 100 Index actually gained 0.2% for the day.
Markets hate uncertainty, and the new U.S. tariffs are creating uncertainty about both their short-term and long-term impacts on the economy and financial markets. In anticipation of tariff uncertainty, in the first quarter, we both diversified portfolios further and reduced risk in our tactical asset re-allocations of client portfolios (consistent with each portfolio strategies objectives and risk profile). We will have more detail on this in our quarterly report to clients.
We realize how unsettling it can be to see the types of swings in the stock market that we have witnessed over the past days. But keep in mind that the source of this volatility is primarily due to headline risk, be it true or false. Certainly there are a broad range of factors that impact the financial markets and we are continuously monitoring and analyzing all of these to determine potential impacts on our client portfolios and tactical asset allocation investment process.
For now, and as always, it is important to stay focused on your long-term goals and not be shaken by short-term market volatility. Leave the work and worry to us. That said, if you ever have concerns about the financial markets, your portfolio holdings, our overall investment strategy, your personal financial plan, or anything related to your personal finances, contact us at 810-953-5510 or toll-free at 866-444-6246.
We always look forward to talking with you.
Sincerely,
David Kudla, CMFC®, CRPC®, CWM®, ChFM®, AAMS®
CEO & Chief Investment Strategist
Mainstay Capital Management, LLC
Twitter: @David_Kudla |
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Vanguard
Tariffs and market volatility: What do they mean for your portfolio?
The newly announced tariffs and broader global trade shifts have contributed to market volatility, testing the patience of even the most disciplined investor. Markets, like people, aren't fans of uncertainty, but it's critical to look beyond the headlines and keep an eye on your long-term goals.
It's also important to note that while the tariff announcement is central to the dynamics at play, there are other currents driving the economy. That's why we caution investors against reacting with tactical or short-term changes to well-considered investment plans—especially since the situation is still unfolding.
In this new video, Vanguard Global Chief Economist Joe Davis and Head of Vanguard Wealth Management Massy Williams discuss the four principles for investment success, how to focus on strategic decisions over emotional reactions, and how Vanguard can help you make the best decision for your goals.
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