Tariffs and Tumult

We wanted to get the Quarterly Performance Reports out quickly this month.  We are only about ten days into April and the index numbers from this past quarter are already looking stale and dated.  Obviously, there is a lot of volatility in the markets, driven almost entirely by the tariffs and the uncertainty surrounding them. 

The stock and bond markets appear to be reacting directly to what is happening geopolitically.  This is not like the Covid pandemic, the financial crisis or the dot-com bubble, which all sent the markets tumbling in recent years.  Those downturns were event driven and took some time to unwind.  The swings in the market we saw this past week seem to be based on expectations of what might happen if tariffs go into effect and stay in effect for a period of time.  We must accept the reality that a ‘tweet’ can move the markets by double digits in either direction.  The whipsawing we have seen this week reflects how quickly the markets can change course.  That may not be the case for much longer, however.  Once tariffs have been in place long enough, price increases on inventories will have to be dealt with.  Supply lines might be redrawn.  The actual, realized effect of tariffs on the price of goods and services will impact the economy, and that will be more difficult to reverse than what we are seeing in the stock market.  

The uncertainty in the markets amplifies the importance of having the appropriate long-term approach.  This is done primarily through asset allocation.  An investor wants to have the right combination of asset classes and sectors to mitigate the volatility in the short-term so that they are better able to achieve their long-term goals.

 ^{*The index returns are drawn from Morningstar Advisor Workstation.  Indexes are unmanaged and cannot be invested in directly by investors.  MSCI EAFE NR USD-This Europe, Australasia, and Far East index is a market-capitalization-weighted index of 21 non-U.S., industrialized country indexes.  S&P 500 TR USD – A market capitalization-weighted index composed of the 500 most widely held stocks whose assets and/or revenues are based in the US; it’s often used as a proxy for the stock market. TR (Total Return) indexes include daily reinvestment of dividends. Bloomberg US Agg Bond TR USD This index is composed of the BarCap Government/Credit Index, the Mortgage Backed Securities Index, and the Asset-Backed Securities Index. The returns we publish for the index are total returns, which includes the daily reinvestment of dividends. The constituents displayed for this index are from the following proxy: iShares Core US Aggregate Bond ETF. MSCI Emerging Markets IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Russell 2000 – Consists of the smallest 2000 companies in the Russell 3000 Index, representing approximately 7% of the Russell 3000 total market capitalization. The returns we publish for the index are total returns, which include reinvestment of dividends.  The MSCI Emerging Markets (EM) IndexSM is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. As of May 2005 the MSCI Emerging Markets Index consisted of the following 26 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey and Venezuela.. The FTSE NAREIT Equity REITs Index is an index of publicly traded REITs that own commercial property. All tax-qualifies REITs with common shares traded on the NYSE, AMSE or NASDAQ National Market List will be eligible. Additionally, each company must be valued at more than $100MM USD at the date of the annual review. Equity REITs include Diversified, Health Care, Self Storage, Industrial/Office, Residential, Retail, Lodging/Resorts and Specialty. They do not include Hybrid REITs, Mortgage Home Financing or Mortgage Commercial Financing REITs. Bloomberg Sub Gold TR USD Description unavailable. Formerly known as Dow Jones-UBS Gold Subindex (DJUBSGC), the index is a commodity group sub-index of the Bloomberg CI composed of futures contracts on Gold. It reflects the return of underlying commodity futures price movements only and is quoted in USD.}