Comments based on information available as of 7:30am CT on 3/28/2025
Growth: April Showers Bring May Flowers?
Many were hoping that tariff announcements would bring clarity. Instead, the outlook is much cloudier. Will April showers bring May flowers? That’s the great debate. A lot depends on what plays out over the next few weeks. The breadth and size of tariffs surprised investors. What could be equally surprising is if some–or many–of these rates get negotiated down.
Inflation: The Fed Won’t Fret
Sales taxes, value added taxes, and tariffs all do the same thing: increase the price paid. They differ in how they’re applied. A sales tax is added at the register. A value added tax is applied at the various stages of production. A tariff is applied at the port of entry, so it is only applied to certain goods. The lesson from other countries is that these taxes can temporarily increase inflation. The Fed knows that. As a result, it won’t fret that this type of inflation is persistent. It will likely be inclined to soften the growth damage than to lean against the inflation effects.
Policy: An Operation Without Anesthesia
After the market reaction to announced tariffs, President Trump said, “The operation is over, the patient lived.” For investors looking at their portfolios, it could have felt like an operation performed without anesthesia. Markets are trying to price in possible changes to profits, growth, and inflation. Stay tuned, though. The speed of recovery will depend on how, and how quickly, officials negotiate.
Looking ahead: Roll With The Punches
In investing, enduring volatility is simply the price of admission for long-term gains. The market’s swings—its inevitable ups and downs—don’t have to be setbacks. It is hard to roll with the punches when some days you feel like your portfolio is being pummeled. But those moments should pass. A diversified strategy that is thoughtfully adapting to changing circumstances can’t prevent the punches, but it can help soften the blows.
