Ali & Daniel on Today’s Economic Environment

Perspective on Trump Tariffs, Negotiations & Media Fallout from April 3

– Ali Kemp, CEO

Today’s media headlines include words like “nosedive,” “wipeout,” “cratering,” “worst day since 2020,” “plunge,” and “pummel.” It’s no surprise that American investors are feeling fear, uncertainty, and anxiety about both their money and the future of our economy.

Trump’s first months in office have been eventful, to say the least, and the announcement of new and potentially impactful tariffs has caused the largest stock selloff since the pandemic.

Let’s break down some meaningful questions.

What Have We Been Monitoring?

Today, at the Financial Insights offices, we’ve been discussing tariffs, inflation, U.S.-international trade negotiations, and the short- and medium-term impacts on both the global economy and our investment strategies. Some notable areas of research include U.S. stocks and their international reach/reliance, as well as the global supply chain. Other noteworthy topics include the strength of the U.S. dollar, bond pricing, and, in the medium term, interest rates and the outlook for unemployment.

Through our discussions and close monitoring of the ongoing economic situation, we are able to have meaningful conversations with our clients and react accordingly with our investment strategies.

How Does This Impact Me and My Portfolio?

The majority of Financial Insights clients are invested in a diversified, conservative-to-moderate fashion. Through asset allocation, we invest in many areas, including those that perform well during times of market uncertainty and volatility. We do not have all of our eggs in one basket.

I am happy to report that our portfolios are faring quite well relative to the U.S. market.

Looking at our overall firm asset allocation, we currently have 35% in bonds and cash, which are in positive territory year-to-date. One of the reasons we allocate to bonds is for times such as these. Bonds act as a hedge against volatility and downturns, and they are performing well in 2025.

Our U.S. stock representation is 52% of our overall allocation, with non-U.S. stocks representing 13%. The non-U.S. portion is notable because most international markets are also positive year-to-date. The year-to-date return of the EAFE (Europe, Australasia, and Far East) index is 8.5%.

To summarize, most clients at Financial Insights do not replicate the performance of the overall U.S. stock market, and some are even in positive territory year-to-date. I urge you to reach out and schedule a phone call if you would like to discuss your specific accounts. But by and large, I am very happy and comfortable with our current investment allocation.

What Is Our Plan Moving Forward?

We’ve already prepared. Much like a sports team trains in the offseason for a competitive and successful year, we have positioned our investments to weather a variety of market environments, including volatile ones.

There are opportunities and tools we may implement in 2025. Look for your advisor to do some rebalancing if we see large gains or losses in any specific area, tax loss harvesting to maximize tax savings during down years, and buying opportunities for clients who receive infusions of new cash.

The most important thing to remember is not to make quick, emotional decisions during times of market volatility. It’s also crucial to take a wait-and-see approach when assessing the impact of immediate economic news during this new presidency.

We are here to lend guidance, and we would love to speak with you.

Thank you for being a valued client of the Financial Insights family. We look forward to continuing to work for you throughout the 2025 year.

 

Daniel McCaffrey, Senior Portfolio Manager & Partner

You might have seen recent news about potential changes in U.S. trade policy, specifically around possible new tariffs. We wanted to share our perspective on this.

A new broad tariff policy from the administration is being implemented, but the final details – like how long they might last, how negotiations could play out, or if other industries might be affected – aren’t yet clear. Reactions from other countries are varied, adding another layer of uncertainty. Changes like these often bring up questions and can cause short-term market noise. These policy changes can affect estimates for GDP growth and inflation rates. Markets, in turn, try to factor in how these potential changes might affect company profits down the road. Businesses, meanwhile, are generally proceeding cautiously given the uncertainty.

With this in mind, it’s important to remember our investment approach is built on these core principles:

  • Thinking Long-Term: We believe successful investing requires looking out ten years or more. Your portfolio’s returns are primarily driven by these long-term decisions, not by reacting to daily news.
  • Staying Disciplined: We stick to an asset allocation approach with periodic rebalancing. Part of this discipline means recognizing that successfully timing market swings is extremely difficult, so we don’t let short-term volatility or emotions drive decisions.
  • Diversification: Spreading investments across different areas is key to reducing the risk that any single event heavily impacts your financial plan.

These principles are particularly important during times of uncertainty. History shows that while headlines and short-term events (like pandemics, conflicts, or economic shocks) can be concerning, markets have rewarded investors who maintain a long-term perspective. Over nearly a century, stock market growth has historically overcome numerous global challenges and significantly outpaced inflation.

While this news clearly shifts market sentiment in the short run, our approach doesn’t change. Your portfolio is built around your long-term goals and risk tolerance, and it’s designed to handle different market conditions through diversification and sticking to your long-term asset allocation.

We’ll keep monitoring things, of course, but this kind of short-term uncertainty doesn’t change our fundamental, long-term approach of staying the course.

Please reach out if you’d like to chat about this further.