Advisors Navigate Choppy Waters after Trump Tariffs

One, two, three, four…Trump declares a trade war.

The Trump administration’s aggressive tariff strategy is sending shockwaves through the global economy and has wiped out almost all stock gains since Election Day for the S&P 500. The levies of 25% went into effect on Mexican and Canadian goods on Tuesday, with additional 10% duties imposed on Chinese imports. Now, it’s up to advisors to parse out the rhetoric, and focus on what the actual impacts of the tariffs will be on clients’ portfolios.   

“After 30 years in this business, I’ve learned between Brexit, Covid, and tech busts, that reacting to market events in the near-term is usually not the best course of action,” said Stephen Kolano, CIO of Integrated Partners.

Put Your Guard Up

One of the most widely expected consequences of Trump’s tariffs is rising prices, and that’s forcing advisors to add more defensive positions. For Kolano, that includes buying gold and Treasury Inflation-Protected Securities, known as TIPS. While no one likes the dreaded R-word, advisors are bracing for potential trouble ahead. 

“It’s never too early to consider a recession,” Kolano said, adding that drops in consumer confidence and an increase in jobless claims, are signs of a looming slowdown. This week, advisors saw the impacts start to unfold:

• On Monday, the Dow fell roughly 650 points, the Nasdaq about 500 points, and the S&P 500 experienced its biggest single-day drop of the year in anticipation of the tariffs.
• All major indexes are mixed year to date with just the Dow in the green, up just 1.5% by market close Wednesday.

Recession Incoming? Only a few short months ago, Frontier Wealth Strategies co-founder Michael Hansen didn’t imagine the US would be heading toward a possible pullback, but now he’s fearing the worst. “Most recessions are caused by bottlenecks in the economy,” he told Advisor Upside. “Not this one. Trump 100% owns this.”

While advisors should stay nimble to navigate tariffs and a changing economy, they shouldn’t become impulsive. Keep in mind, Trump is also known for being fairly fickle, said Patrick Marcinko, Bogart Wealth advisor. “You can’t just throw out a financial plan after a few days of bad trading,” he told Advisor Upside. Sure, Mexico and Canada may be America’s trade frenemies today, but that could all change tomorrow. 

“Trump is very serious about pushing policy through tariffs…but it wouldn’t be a surprise if the current outlay of tariffs changes not too long from now,” he said.