Tariff Turbulence: Navigating Market Volatility with a Long-Term Lens

President Trump’s tariff plan announcement triggered a stock market decline of about 10% on Thursday and Friday. If fully enacted as described on Wednesday, the proposed tariff rates would return to levels not seen since the early 1930s. This marks a sharp reversal from nearly a century of declining tariffs and runs counter to the free trade policies that have dominated recent decades.

The knee-jerk reaction from investors—to sell stocks and buy bonds—is understandable. While the announced tariff levels are not unprecedented, the speed and scale of their potential implementation are. Many companies will be forced to rethink their supply chains and possibly adjust pricing. Though U.S. firms are highly adaptable, these shifts will take time. Recognizing the likely challenges, many economists are revising down their growth forecasts and raising inflation expectations.
In all likelihood, some of the proposed tariff rates will be negotiated down in the coming weeks. Still, the message is clear: new, broadly applied tariffs are coming, and the economy, businesses, and consumers will need to adjust.

In the short term, stock market volatility is expected to remain elevated, closely tracking tariff-related developments. Looking further ahead, company earnings growth, interest rates, and valuation metrics will determine which stocks succeed in this evolving environment. Fortunately, domestic companies are entering this era from a position of strength. The economy grew 2.8% last year, corporate balance sheets are solid, and consumer net worth remains high.

Interest rates have fallen since the tariff announcement, with the yield on the U.S. 10-year Treasury note dropping to 4%. This decline should help ease financing conditions—including mortgage rates—and support stock valuations, which have already declined over the past quarter.

As with many headline-driven events, caution is warranted. While these tariffs and the surrounding uncertainty will be disruptive, forecasting their true impact is a different matter. Disruption creates opportunity—for both companies and investors. As always, maintaining a long-term perspective remains crucial.

Dan Lagan, CFA | Chief Investment Officer

This material is for information purposes only. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, Congress Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future.