The long-awaited tariff announcements were made. I had expected a binary outcome – either tariffs would be announced as expected and a path to negotiating better trade agreements would become apparent (buy the news event), or the contrary, where tariffs were far higher and trade policy much more aggressive than expected. A popular word has been ‘worst case’. I’m not excited to say that this could get much worse, but it certainly can. Is that case avoidable? Absolutely.

The most recent quarter has been one to forget – starting with a correction due to policy uncertainty. Certainly, that has cascaded further as the market digests the recent announcements. The Q1 correction was the 5^th fastest 10% correction in 75 years, and you can thank program/algorithmic trading for much of it. In fact, 85% of trading is being done by computers. This is the new normal and something that we will have to get used to.

The Federal Government must get its debt issue under control. If it does not, this market volatility will look like a cake walk. A lot is going to have to change to transfer government sector spending into the private side. A lot of policies will be changing and likely very quickly. It is reasonable to expect that there will be retaliations globally on these tariffs, but one thing is certain: these hurt and affect other countries much more than they do us? Why? Simply because we are the largest economy in the world and the largest buyer of global goods. Other countries cannot afford to retaliate for too long as they will easily push themselves into economic peril.

I can’t say that I am encouraged by how this has been done. I would have personally gone about this much differently, but I also am not the President nor am I in any position to influence these decisions. For now, we have to work with what we have and make responsible, disciplined, and prudent decisions for our clients.

Nobody knows what the next news story will be or what tomorrow will hold but based on my comments above on the mechanics of today’s markets, any trade deals or relief/unwind of these policies can propel the market higher as quickly as it came down. The risk can begin to shift from the downside to being underexposed to the upside.

At some point in the future, the market will achieve all time highs again and any part or all of 2025 will become a distant memory. For our long-term equity investors, this is a blip on the long-term radar even if we take another 10-15% off. For our shorter term and/or more conservative clients, your bonds are going up in a big way and your cash remains stable.