The market reacted negatively last week as China retaliated to the tariffs that the Trump administration announced on April 2nd, which makes staying focused on the long-term as important as ever.
Where We Are Right Now:
- Trade Tensions Escalated: This week, President Donald Trump announced sweeping new tariffs, including a baseline 10% tariff on all imported goods and higher reciprocal tariffs for countries with significant trade imbalances with the U.S. Notably, China faces a 34% tariff, while other nations such as Vietnam, Japan, and the European Union are also impacted with varying rates. As Clark Capital pointed out, the level of tariffs were higher than “even the most pessimistic investors were expecting.”
- China's Retaliatory Measures: In response, China has imposed a 34% tariff on all U.S. imports, effective April 10th. China also introduced export controls on rare earth elements critical for high-tech industries and some additional actions to, in effect, pressure the U.S. into reversing course.
- Market Reaction: These developments have led to market volatility, but that’s actually not out of the ordinary. Remember, the S&P 500 experiences an average of one correction every year, dropping 14% from its highs, on average. Each time, we’re tempted to feel like 'this time is different,’ but remember…
📉 The S&P 500 is down 17% from it’s all-time highs, as of the end of last week…
📈 …after rising 154% over the past 5 years, which includes an almost 20% decline in calendar year 2022.
But you won’t see that on the news! It doesn’t incite panic or fear.
What Might This Volatility Mean for Your Investments?
If there was any good news, it might be that we may have reached peak uncertainty. Additionally, while it is impossible to know when the selling pressure might ease, Clark Capital believes that, “there is a significant possibility that better tariffs will be negotiated (prior to implementation dates) and that the market will rally to reflect a better reality than feared.”
For example, President Trump has already begun negotiations with countries like Vietnam and Israel. More will come and we fully expect these tariff rates to come down in the coming months. The attention will soon turn to tax cuts, deficit reduction, and lower interest rates, which should help stocks find their footing.
While these events contribute to short-term market volatility, it's essential to recognize that such fluctuations are a natural part of a market cycle. Our approach remains focused on long-term objectives and maintaining a diversified portfolio through the ups and downs. This is what helps us all navigate through periods of uncertainty like this.
Is this a Buying Opportunity?
For long-term investors, this is an attractive opportunity. In fact, it could be a great time to put money that is in cash or CDs to work. History suggests you will be rewarded over time. We do not believe this is the time to lock in losses. We urge patience and caution.
"The stock market is a wonderfully efficient mechanism for transferring wealth from the impatient to the patient." - Warren Buffett
We are closely monitoring these developments and assessing their potential impact on portfolios. It's important to remember that market reactions to policy changes can be swift but often stabilize as markets digest new information. If you have any questions or concerns about your financial situation in light of these recent events, please do not hesitate to reach out. We are here to guide and support you, ensuring that your financial goals remain on track.
If you are not currently working with an advisor, get in touch with our team by filling out our Discovery Form to schedule a 30-minute introductory call. We would love to discuss your legacy, values, and goals to determine if Harvest Point® would be a good fit to help you pursue them.
For additional reading, please see this Guide to Tariffs from our partners at American Funds.
Sources: LPL Research, Clark Capital, Franklin Templeton, OfficialData.org
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