Tariff Turbulence: Five Things to Know          

by Jordan Hucht, CFP®, ChFC®, AIF®

Just over two weeks ago, the S&P 500 reached a fresh all-time high on the heels of a red-hot start to the year for stocks. But the rally faded in the fortnight that followed on fear of a tariff-driven slowdown. With the market ending its worst week in years, I thought it would be helpful to write a short, five-point list of things to keep in mind as you digest the recent market action and headlines.

1. We began the year with the S&P 500 coming off of two consecutive 20%+ annual gains and trading at a multiple of more than 21 times forward earnings. Expectations were very high, and there was little margin for error if that valuation were to be maintained. In some ways, the market needed a catalyst to create a reset of pricing and expectations, which is a normal and healthy part of the long-term investment cycle.
2. Historically, the average intra-year decline in the S&P 500 is around 14%. As of the time of this writing on Friday afternoon, the current pullback measures just over 6% from the mid-February high. The Nasdaq has declined closer to 10%, but that’s logical considering higher valuations and outsized recent gains in the tech-heavy index.
3. Other asset classes – specifically, bonds and international stocks – have performed well this year. This is a testament to the importance of diversification and asset allocation. Timing the market is not a winning strategy, but planning-driven portfolio management is.
4. This is a very fluid situation, and markets are reacting as such. Information is changing by the hour, creating whipsaw reactions in financial markets. Though the market can be hypersensitive to daily headlines and the latest economic data points, long-term investment plans should be duller. A storm is best guided by a steady hand.
5. The uncertainty is likely to continue in the coming months. This isn’t intended to strike fear but rather to set an appropriate expectation. There are a lot of policy and economic cross-currents affecting the financial markets at present, and it’ll take time for the longer-term results to be known.

As always, in times of heightened volatility, it’s important to zoom out and focus on long-term outcomes. Peace of mind comes from prudent financial planning and appropriate portfolio management.

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Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results.