If you’ve been watching the headlines lately, you might feel like the sky is falling. Again.
From political drama to policy pivots, one topic that’s been stirring up serious market chatter is tariffs, particularly those introduced under the Trump administration. It's time to offer a bit more context, so you’re not left navigating headlines without a compass.
Let’s walk through what’s happening, what it means for your portfolio, and why it might not be the catastrophe some are claiming.
Are Tariffs Really That New or That Bad?
Let’s start with a bit of perspective: tariffs aren’t new. They’ve just been dusted off and put center stage in a way we haven’t seen in decades.
Yes, the current scope and application under the Trump administration are noteworthy. But here’s what’s often missing in the panic: other countries have long imposed tariffs on U.S. goods. The idea of reciprocal tariffs isn’t radical - it’s reality. Critics warning of an economic doomsday for the U.S. rarely mention the longstanding tariffs that exist globally.
Sure, the U.S. relies on global supply chains. But the rest of the world is just as dependent on us. This is a complex, interdependent economy, not a one-sided relationship.
Turbulence ≠ Catastrophe
Let’s borrow a metaphor from air travel. Turbulence can be unsettling, but it’s not the same as a crash. The same goes for markets.
As of April 4, 2025, the S&P 500 was down 13.5% year-to-date. That may feel painful, but here’s something to remember: since 1980, the S&P 500 has averaged a 14% intra-year drop every single year. Declines happen. What matters is how you respond to them.
If your portfolio is thoughtfully allocated for your long-term goals, temporary dips don’t need to rattle you. Panic is not a strategy—planning is.
So… are tariffs to blame for market performance in 2025?
Not entirely.
While tariffs have certainly played a role, the S&P 500 actually peaked in mid-February, on the 19th, to be exact. That’s when it hit 6,144.15, just shy of its intraday high of 6,147.43. The market was already trending downward before the latest tariff wave hit.
Translation: the market was due for a pullback, and tariffs just helped move things along.
The Bubble Beneath the Surface
Let’s talk about valuations.
For the past several years, the S&P 500 has hovered well above its 25-year average, driven largely by - you guessed it - the Magnificent Seven. These mega-cap tech names fueled impressive growth, pushing their combined share of the index from 12.3% to 32% in just a decade.
But nothing grows forever without interruption. When price-to-earnings (P/E) ratios stretch too far, they eventually snap back. Sometimes earnings catch up. More often, prices come down.
That’s not panic. That’s physics.
What About the Economy?
Here’s where things get even more grounded. Let’s look at some recent data:
- Jobs: The March jobs report showed 228,000 new jobs, well above the prior 12-month average.
- Unemployment Claims: No major movement in either direction—holding steady.
- Housing Permits: Slight dip in February, but still hovering around recent norms.
- Durable Goods Orders: Up for two straight months.
- Consumer Sentiment: Down slightly, but within expected volatility.
And a key stat from The Conference Board’s Leading Economic Index (LEI): yes, it’s been declining. But it hasn’t yet crossed the threshold that typically signals a recession (a 4%+ drop over six months). Currently, we’re only down 1.0% in the last six-month period.
So while the economy isn’t booming, it’s not collapsing either.
Stay the Course, Stay Informed
We understand the news cycle can feel like a pressure cooker. But just because something is loud doesn’t make it true or permanent. Tariffs are important. So is market volatility. But so is remembering why you invested in the first place.
This is exactly why we emphasize customized, well-diversified planning - because uncertainty is inevitable, and thoughtful preparation is your best defense.
If you have questions about how your portfolio is positioned or whether any updates are needed in light of current events, let’s talk. We’re here to help you filter the noise and stay focused on what matters most.