Trade Wars, Tariffs, and Navigating Market Risk
Recent news on tariffs and government job cuts has raised concerns about a possible trade war, resulting in a market pullback with the Nasdaq now near correction territory. While market swings are never pleasant, we believe it’s important to maintain perspective, especially when it comes to your long-term financial goals.
Why are Markets Concerned About Tariffs?
President Trump’s has implemented tariffs on Canada, Mexico, and China, although they are subject to change. There are also more potential tariffs under consideration.
While this has contributed to market uncertainty and a roughly 5% pullback in the stock market, it’s important to keep a few facts in mind.
- Historical Context: The U.S. has a long history of using tariffs as policy tools, particularly to protect key industries and national interests. Previous trade tensions often resulted in eventual agreements.
- Economic Impact: While tariffs can increase some consumer and business costs, their actual economic impact has historically been less severe than initial market reactions suggest.
- Negotiating Strategy: Tariffs are frequently used as negotiating tools to achieve broader policy objectives, often leading to new trade agreements.
Why Portfolio Balance Matters Now
During periods of market volatility, holding different asset classes proves particularly valuable. While some market sectors face challenges, others have performed well. Bonds have provided positive returns as interest rates declined, helping to offset stock market fluctuations in balanced portfolios.
Historical Perspective on Market Pullbacks
The current market decline is normal by historical standards. Similar or larger pullbacks occurred multiple times in recent years, including twice in 2024, three times in 2023, and twelve times in 2022.
We believe the below graphic is helpful in putting this market volatility into perspective.
While market swings can be uncomfortable, history shows that maintaining a disciplined, longer-term investment philosophy should yield the best results. Towerpoint Wealth clients should feel confident that your investment plan and portfolio has been personalized, has a bias towards income-producing (read: interest and dividends) investments, and has been designed to weather various market conditions while pursuing your unique specific financial goals.
Remember, successful investing isn’t reactive, which, understanding today’s 24/7 news cycle, can be tempting. It’s about maintaining a well-constructed portfolio aligned with your longer-term personal and financial objectives, and systematically rebalancing on a semi-annual basis. This will remain true, despite ongoing tariff concerns that may impact the market in the coming weeks and months.
We continue to monitor developments closely and are here to discuss any thoughts or concerns you may have.
Best regards,
Your Towerpoint Wealth Team
Towerpoint Wealth is a Registered Investment Adviser. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Towerpoint Wealth and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Towerpoint Wealth unless a client service agreement is in place.
For illustrative purposes only. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein.
