This past Wednesday after US stock markets were closed, President Trump announced his long-awaited tariff plan. The scope and breadth of the announcement shocked everyone and led to a substantial two-day selloff in U.S. and global equities. After Friday’s close, the S&P 500 is nearing a bear market, typically defined as a decline of 20% or more from the index’s all-time high (ATH), while the Nasdaq 100 and the Russell 2000 small-cap index are both now in a bear market. This was the fourth worst two-day selloff in the post-WWII period.[1]
Source: FactSet
What was in the White House’s announcement on Wednesday?
Tariffs were placed on more than 180 countries or regions of the world ranging from the 10% baseline tariff to reciprocal tariffs as high as 50%. A tariff is a tax on imported goods and services. It can be used to raise revenue, protect domestic industries, or attempt to force change in the behavior of another country.
- A 10% baseline tariff already went into effect on April 5. This levy will apply virtually across-the-board, on all imports to the United States.
- Most nations will also be hit with what President Trump called a “discounted reciprocal tariff.” Rates scale up for nations the White House considers bad actors on trade. These additional tariffs go into effect on April 9.
- A new 34% tariff on China will add to previous duties, like the 20% tariff Trump imposed over fentanyl. The new tariff rate on Chinese imports will be 54%, plus any previously imposed tariffs from either the Biden or first Trump administration.
Are there any other tariff-related things to note?
- Canada and Mexico are excluded from the reciprocal tariff regime. They are still subject to plans to impose 25% tariffs on most imports to the U.S. for what Trump says is their role in fueling the fentanyl crisis and illegal immigration.
- Auto tariffs of 25% took effect on April 2nd.
Why did markets fall so much?
The Trump Administration placed tariffs on many more countries and at much higher levels than anyone expected.
These high tariffs have raised fears of a global economic slowdown as we expect to see goods prices rise in response to the tariffs and/or profits fall at businesses that choose to absorb the costs themselves. Additionally, there is a fear that countries respond with retaliatory tariffs rather than try to negotiate with the U.S. We’ve already seen China announce a 34% retaliatory tariff this past Friday.
Original estimates of US GDP growth for 2025 were in the range of 2 to 2.5%. Any trade war that results from these tariffs could significantly reduce this growth and potentially cause a recession.
What happens next?
We are looking closely for signs of negotiation vs retaliation. For example, Vietnam is one of our largest trading partners, producing nearly 1/3 of US footwear in 2023.[2] The Trump Administration placed a 46% tariff on them and the Vietnamese President quickly offered to cut their tariffs to 0% if we do the same. How Trump responds will be a sign to other countries about how they should react. Any signs the most punitive tariffs are being postponed for negotiations could lead to a sharp rally in stocks.
What about selling now and getting back in when we know what’s ahead?
Stock markets are forward-looking. Stock prices seek to reflect the future, balancing the current set of information against analyst expectations of future cash flows. This means Wall Street is already anticipating some problems in the economy ahead. It is important not to make hasty decisions in these conditions. Right now, the investing environment is like driving in foggy weather. We recommend slowing down, staying the course, and looking ahead to clearer skies.
You can see from the table below that market timing is next to impossible, even for professional investors. Missing just the best 10 days over the past nearly 40 years would have reduced your total returns by over 2% annually while missing the best 60 days would have dropped your returns to less than 3% per year. It is impossible to predict the best days in the market and we often see them occur following the worst days.
Source: Morningstar. Data as of March 10, 2025.
What Now?
- Keep a Long-Term Perspective
We know that you may be feeling discomfort with recent market declines. Research shows that we feel the pain of losses twice as much as we enjoy the satisfaction of gains.[3] That’s why it’s important to remember that, historically speaking, staying invested increases your odds of success meaningfully over time. Since 1937, investors have made money in the broad U.S. stock market over 97% of the time in any given 10-year period.[4] Focusing on your long-term plan is more important than ever when markets are turbulent.
- Stay Diversified
Following two years of 20%+ US stock market returns, it can be easy to forget that diversifying your investments helps cushion your portfolio in challenging times. We recommend investors utilize traditional stocks, bonds, and alternative investments in their investment plans. Core fixed income has helped offset some of the decline in stocks while multi-strategy hedge funds, alternative credit managers, and long/short equity strategies have held up significantly better than public equities.
- Keep Rowing!
When the future feels cloudy, it’s often helpful to fall back on the lessons of the past. One story that sprang to mind comes from The Odyssey. In it, Odysseus and his crew must sail past the Sirens—mythical monsters whose songs lure sailors to ruin. To protect his men, Odysseus instructs them to plug their ears and keep rowing. He lashes his body to the mast so that he can listen to the Sirens’ song while his crew rows on, unable to hear the chaos around them.
Here at AlphaCore, your advisors are constantly scouring the latest data to keep you abreast of all of the rapidly changing developments, sifting through the noise as we try to find actionable signals. Where volatility creates opportunity, we will move with speed and conviction. Most of the time though, we find ourselves tied to the mast, resisting the temptation to react to every latest headline – just like Odysseus. As it relates to your portfolios, we’d advise you to try to tune out the panic and keep rowing.
By focusing on the long term, staying diversified, and keeping your goals top of mind, together we can sail through this period of volatility. We abide by a simple principle: time in the market is much, much more important than timing the market. If you have questions or want to revisit your strategy, we’re always here to help.
Important Information
S&P 500 INDEX: S&P 500 index is a float-adjusted market-cap weighted index, largely reflecting the large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ 100 INDEX: The Nasdaq-100 is a stock market index made up of equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock exchange. It is a modified capitalization-weighted index.
RUSSELL 2000 INDEX: A comprehensive view of small-cap performance, the Russell 2000 measures the performance of approximately 2,000 small-cap US equities.
This material is being provided for informational purposes only. This commentary represents the current market views of the author, and AlphaCore Capital in general, and there is no guarantee that any forecasts made will come to pass. Due to various risks and uncertainties, actual events, results or performance may differ materially from those reflected or contemplated in any forward-looking statements. The opinions are based on market conditions as of the date of publication and are subject to change. No obligation is undertaken to update any information, data or material contained herein.
Neither the information nor the opinions expressed herein constitutes an offer or solicitation to buy or sell any specific security, or to make any investment decisions. AlphaCore provides investment advice only within the context of our written advisory agreement with each AlphaCore client. Past performance is not indicative of future results. The value of an investment may be affected by a variety of factors, including eco- nomic and political developments, interest rates and foreign exchange rates, as well as issuer-specific events.
Any specific security or strategy is subject to a unique due diligence process, and not all diligence is executed in the same manner. All investments are subject to a degree of risk, and alternative investments and strategies are subject to a set of unique risks. No level of due diligence mitigates all risk, and does not eliminate market risk, failure, default, or fraud.
The commentary may utilize index returns, and you cannot invest directly into an index without incurring fees and expenses of investment in a security or other instrument. In addition, performance does not account for other factors that would impact actual trading, including but not limited to account fees, custody and advisory or management fees, as applicable. All of these fees and expenses would reduce the rate of return on investment.
[1]Source: Wall Street Journal
[2] Source: Trade Group Footwear Distributors and Retailers of America
[3] Source: Daniel Kahneman “Thinking, Fast and Slow”
[4] Bloomberg data from 12/31/1936 – 03/31/2025.