Presenters: Andy Pratt, CFA and Adam Newman, CFA, CFP®, MT, RICP®
Here is the webinar recording from April 3rd, 2025. You can browse the topics discussed and the main takeaways using the sections and time stamps below:
Click the time stamp in each section title, and you will jump right to that part of the video on a new screen.
01:12 - Historical Context for Tariff Negotiations
03:09 - 'Liberation Day' Tariff Announcement
04:47 - Understanding Tariffs
08:22 - Trump's Intentions with Tariffs
12:46 - Tariffs vs. Inflation
15:35 - Economic Impact of Tariffs
18:27 - Federal Reserve Response
21:30 - Market Reaction to Tariffs
24:39 - Historical Market Response to Major Events
26:29 - Volatility in Bull Markets
28:36 - How We React to Market Volatility
36:35 - Client Opportunities During Volatility
42:00 - Q&A Session
Historical Context for Tariff Negotiations (01:12)
- 2018-2019 Border Wall negotiation - 35-day government shutdown used as leverage for funding
- 2018-2020 NAFTA replacement - "worst trade deal ever" threats used to bring Canada and Mexico to the negotiating table
- 2018-2020 China Trade War - tariffs used as leverage, resulted in Phase One trade deal in 2020
- Pattern of using "shock and awe" announcements as a negotiation strategy
'Liberation Day' Tariff Announcement (03:09)
- New tariffs announced include 10% flat tariff across all imports
- Additional tariffs on net exporters
- Market had expected some tariffs but was surprised by the scope
- Trump indicated tariffs could be reduced if countries remove trade barriers
- Current uncertainty about final implementation and outcomes
Understanding Tariffs (04:47)
- Tariffs are taxes on imported or exported goods
- Example: $12 foreign shirt with 25% tariff costs $15 when imported to US
- Tariffs are paid by the importer, not the exporting country
- Companies then decide whether to absorb costs or pass them to consumers
- Goal is to make domestic goods more competitive relative to imports
Trump's Intentions with Tariffs (08:22)
- Three main goals outlined:
- Economic independence - reshoring manufacturing to the US
- Revenue generation - potentially to offset tax cuts or reduce deficit
- Removing barriers to entry - making US companies more competitive overseas
- Debate about whether this approach will follow historical pattern of negotiation or represent a more permanent policy shift
Tariffs vs. Inflation (12:46)
- Tariffs create one-off price shocks to specific goods
- Different from structural inflation seen in 2022
- Example from previous tariffs: laundry equipment saw initial price spike but then declined as competitive dynamics adjusted
- Federal Reserve views tariff-induced price increases differently than broader inflation
Economic Impact of Tariffs (15:35)
- Tariffs alone don't typically cause a recession
- However, uncertainty can impact business and consumer behavior
- Current economic backdrop remains strong despite slowing
- Labor market, profit margins, and retail spending remain positive
- Question remains whether this will be a short-lived negotiation or a longer-term policy
Federal Reserve Response (18:27)
- Fed has dual mandate: full employment and price stability
- Fed Chair Powell has indicated they won't overreact to tariff-induced inflation
- Will distinguish between structural inflation and one-time price shocks
- Focus remains on long-term inflation trends rather than temporary tariff impacts
Market Reaction to Tariffs (21:30)
- S&P 500 down 4%, NASDAQ down 5%, Russell 2000 down 6% on announcement day
- Asian and European markets also fell
- Market surprised by the scale of tariff announcements
- VIX (volatility index) elevated but not as high as might be expected given the sell-off
Historical Market Response to Major Events (24:39)
- Average S&P 500 return one year after major geopolitical events: +14.25%
- Examples include Korean War, Cuban Missile Crisis, Gulf War, 9/11, Brexit, COVID
- 2018 China tariff situation saw a V-shaped recovery after initial 20% selloff
- Markets tend to anchor to corporate profits and earnings over time
Volatility in Bull Markets (26:29)
- 5% pullbacks are normal and frequent in bull markets
- Historical data shows most bull markets experience multiple 5-10% corrections
- About 80% of 10% corrections do not turn into bear markets (20%+ declines)
- Volatility is the price investors pay to achieve long-term equity returns
How We React to Market Volatility (28:36)
- Two main approaches were discussed:
- Asset allocation strategies - balancing stocks, bonds, and alternatives based on risk tolerance and goals
- US equity strategy - focusing on quality stocks and adjusting style/size factors
- Market volatility often creates opportunities for stock selection
- Recent shift from 60/40 growth/value split to 50/50 split in response to changing market dynamics
- Increased allocation to large caps (80/20 large to small) due to small-cap weakness
Client Opportunities During Volatility (36:35)
- Market pullbacks create buying opportunities for cash on the sidelines
- Time to reassess risk tolerance if current volatility is causing stress
- Good opportunity to review financial plans and ensure proper asset allocation
- Reminder that most corrections don't turn into bear markets
- Importance of staying invested for long-term goals
Q&A Session (42:00)
- Duration of market downtrend - no precise prediction but corrections typically don't last long
- Impact on style shifts - moving from 60/40 growth/value to 50/50 as value stocks show better resilience
- Understanding tariff revenue - importers pay tariffs and either absorb costs or pass them to consumers
- Protective nature of stock selection - quality and value factors typically provide some downside protection
- Investing cash reserves - generally a good opportunity if the time horizon is 5+ years
The next quarterly webinar is scheduled for April 16th at 12:30 PM Eastern time, where the team will provide further updates on market conditions and investment strategies.