This week, the U.S. announced a broad set of new tariffs on imported goods—one of the most significant trade policy moves in decades. While markets were generally expecting an increase in tariffs, the announced policy exceeded even the most aggressive forecasts. This has triggered significant market volatility, and we want to provide clarity on what this means and how we’re managing through it.
What happened?
The government introduced a 10% universal tariff on nearly all imports (excluding Canada and Mexico), along with additional country-specific tariffs as high as 49%. These measures are expected to slow economic growth and increase inflation in the near term, raising concerns about the possibility of a recession.
How are markets reacting?
Stock markets have moved lower—particularly in sectors like consumer goods and technology that depend heavily on global supply chains. On the other hand, bond prices are rising as investors seek safer assets.
What does this mean for your portfolio?
The possibility of unexpected shocks to the economy is exactly why we build portfolios the way we do. Our combined focus on high-quality companies and valuation discipline is doing what it’s designed to do: helping protect capital during periods of heightened volatility.
Moments like this also reinforce the importance of diversification. Bonds are delivering positive returns this year, helping soften the impact of declining equity markets. International stocks—which have long been out of favor—have also outperformed in recent days.
What are we doing now?
Because this is a policy-driven shock, the actions of policymakers will play a key role going forward. That means both a swift resolution and continued escalation are possible outcomes. If the current tariffs remain in place, we expect to see downward revisions to economic and earnings growth, perhaps even an outright contraction. But if the policy is reversed, we could see a rapid market rebound.
Timing the market is impossible in the best of times. Markets can turn quickly, and the best days often come right after the worst ones. Trying to time getting out and back in rarely works and often results in missing those sharp rebounds. Our goal is to stay disciplined and keep your portfolio positioned to participate in long-term growth, even when the short term feels uncertain.
We build portfolios with scenarios like this in mind. Our focus on quality gives us the flexibility to act when opportunities arise, and periods of volatility often create those opportunities. We’re watching closely and will look to add high-quality investments at attractive prices while continuing to monitor existing holdings to ensure they’re performing as expected.
As always, we’re here to answer any questions and will continue to provide updates.
Disclaimer: Johnson Investment Counsel cannot promise future results. Any expectations presented here should not be taken as any guarantee or other assurance as to future results. Our opinions are a reflection of our best judgment at the time this material was created, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events or otherwise.