Navigating Economic Uncertainty: Special Market Update

Navigating Economic Uncertainty

Welcome to another special market update, where I’ll be addressing the continued market volatility and economic uncertainty. It has been approximately 20 days since President Trump’s tariff announcement. It’s been an incredibly turbulent time across all the major markets following the announcement, so I wanted to provide an update on where we stand today.

Elevated Market Volatility

The U.S. equity market declined significantly in the two trading days after the tariff announcement, with the S&P 500 posting back-to-back declines of more than 4%, marking the biggest two-day drop since the global pandemic in 2020. When the market reopened on Monday, April 7, it experienced one of the largest intra-day comebacks in recent memory, only to be followed by another sharp decline the following day.

During the middle of the trading day on Wednesday, April 9, President Trump announced a 90-day pause on certain tariffs, which triggered a significant relief rally in the market. Since then, the market has been essentially churning sideways, albeit with elevated volatility. Market participants are now trying to assess the earnings impact of this historic reordering of global trade.

FIGURE 1 – S&P 500 Since Tariff Announcement – FactSet and The Wall Street Journal₁

Trump’s Criticism of Fed Chairman Continues

More recently over the Easter weekend, the President criticized the recent actions or rather inactions of Federal Reserve Chairman Jerome Powell and the Fed’s interest rate policy.₂ Such open criticism of a current fed chair by a sitting president spooked many investors given the potential implications of the long-term independence of the Federal Reserve.

So, with all this economic uncertainty and volatility, it’s reasonable for investors to ask the question of whether they should remain invested in the U.S. equity market. The answer is twofold.

First, the equity market does a very good job of pricing in all new news and information very quickly. With the situation being so fluid, rallies like we saw on April 9 can happen at any time.

FIGURE 2 – S&P 500 – The Best and Worst Days Often Happen Together – Vanguard Investment Advisory Research Center and FactSet₃

FIGURE 3 – S&P 500 – Missing the Best Days Can Be Costly – Vanguard Investment Advisory Research Center and FactSet₄

The second reason is that the best days in the equity market usually occur near the worst days. Missing just a few great days could be costly to portfolios in the long-term.

FIGURE 4 – S&P 500 Index – 30 Years – FactSet₅

What to Remember While Navigating Economic Uncertainty

Public equities have historically done a great job of maintaining and building wealth given a long enough time horizon. While economic uncertainty remains around the tariff policy and the ultimate impacts on earnings growth and the economy is yet to be seen, it’s important to remember the following things:

• Remain disciplined.
• Lean on a solid financial plan.
• Have a diversified portfolio that contains multiple asset classes combined in a way that fits your specific objectives and risk tolerance.

We know that this market volatility is uncomfortable, but turbulence does often present an opportunity. If you have any questions, please don’t hesitate to start a conversation with our team below.