S&P 500 lost $5 trillion in two days in tariff selloff, exceeding a two-day loss of $3.3 trillion in March 2020 when the pandemic ripped across global markets. The S&P 500 fell 10.5% across Thursday and Friday, the index’s worst 2-day stretch since March 2020 and its third worst since the turn of the century. Similarly, the Nasdaq plunged 11.4% and the Dow 9.3% marking their worst 2-day stretch since March 2020.
Insofar as tariffs were expected to be announced by the Trump Administration, the breadth and severity of the levies dwarfed those imposed by Trump during his first term, threatening to upend global supply chains, exacerbate an economic slowdown and boost inflation. The proposed increases, which encompass tariffs on automobiles and other previously disclosed items, are projected to elevate the average US tariff rate to over 20%, marking the highest level in more than a century. Wall Street economists pronounced the tariff outcome as worse than expected. Since the tariff hike was more severe and harsh than what most market participants anticipated, the equity market responded with sharp risk off sentiment. This reflects weaker economic expectations on a macro level as well as the individually impacted company stocks on a micro level.
Business confidence measures have fallen and those for consumers have outright plunged, impacted by uncertainty and expectations for higher inflation. The exorbitantly high tariffs will also likely alter corporate capital expenditures, employment hiring and retention, investment and obviously restrict freedom of trade. While the economic impact of these potential changes for the U.S. economy is expected to be moderate over time, market volatility is likely to remain elevated—and the situation remains fluid.
A key concern is that tariff uncertainty continues with retaliatory tariffs from the EU, UK, Asia and other regions expected to unfold in the coming days. Therefore, early Thursday we forecasted 5,300 as the near-term drop target for the S&P 500 but also stated that should tariff risks persist with trading partners we see the next downside leg to be 5,000. Should global "tit-for-tat" retaliatory tariffs escalate, then the probability of US stocks entering bear market will go higher.
In the bond market, US Treasury yields fell sharply. Investors turn to US government bonds as a safe haven, as well as on expectations of a slowdown in economic growth. The yield on the key 10-year US Treasury note fell to 4.01% from 4.20% before Trump unveiled his plans.
Since we emphasize that the understanding of risks embedded in a portfolio is central to providing value to our clients, we actively manage and build diverse, multi-asset portfolios to capture long-term positive returns while having resilient portfolios that may help weather market volatility. This risk management reflects the concepts of having strategy and asset-class diversification in place, risk management and good defensive planning.
What also sets us apart from our advisory peers is the implementation of several liquid alternative funds in portfolios, which add stability during times of negative volatility, while also offering participation in upward trending (or recovering) markets. Additionally, we have a good degree of gold, gold miners and investment grade bonds that add another layer of insulation. Finally, portfolios have equity loss buffer ETFs that are in place given our expectation of market volatility in 2025.
Therefore, we think our portfolios have the right assets in place to help mitigate losses while positioning client portfolios for the eventual market recovery, whenever that might take place. Finally, I respectfully reiterate some of our most relevant predictions from our 2025 Capital Market Report, released back on January 2, 2025.
Insofar as tariffs were expected to be announced by the Trump Administration, the breadth and severity of the levies dwarfed those imposed by Trump during his first term, threatening to upend global supply chains, exacerbate an economic slowdown and boost inflation. The proposed increases, which encompass tariffs on automobiles and other previously disclosed items, are projected to elevate the average US tariff rate to over 20%, marking the highest level in more than a century. Wall Street economists pronounced the tariff outcome as worse than expected. Since the tariff hike was more severe and harsh than what most market participants anticipated, the equity market responded with sharp risk off sentiment. This reflects weaker economic expectations on a macro level as well as the individually impacted company stocks on a micro level.
Business confidence measures have fallen and those for consumers have outright plunged, impacted by uncertainty and expectations for higher inflation. The exorbitantly high tariffs will also likely alter corporate capital expenditures, employment hiring and retention, investment and obviously restrict freedom of trade. While the economic impact of these potential changes for the U.S. economy is expected to be moderate over time, market volatility is likely to remain elevated—and the situation remains fluid.
A key concern is that tariff uncertainty continues with retaliatory tariffs from the EU, UK, Asia and other regions expected to unfold in the coming days. Therefore, early Thursday we forecasted 5,300 as the near-term drop target for the S&P 500 but also stated that should tariff risks persist with trading partners we see the next downside leg to be 5,000. Should global "tit-for-tat" retaliatory tariffs escalate, then the probability of US stocks entering bear market will go higher.
In the bond market, US Treasury yields fell sharply. Investors turn to US government bonds as a safe haven, as well as on expectations of a slowdown in economic growth. The yield on the key 10-year US Treasury note fell to 4.01% from 4.20% before Trump unveiled his plans.
Since we emphasize that the understanding of risks embedded in a portfolio is central to providing value to our clients, we actively manage and build diverse, multi-asset portfolios to capture long-term positive returns while having resilient portfolios that may help weather market volatility. This risk management reflects the concepts of having strategy and asset-class diversification in place, risk management and good defensive planning.
What also sets us apart from our advisory peers is the implementation of several liquid alternative funds in portfolios, which add stability during times of negative volatility, while also offering participation in upward trending (or recovering) markets. Additionally, we have a good degree of gold, gold miners and investment grade bonds that add another layer of insulation. Finally, portfolios have equity loss buffer ETFs that are in place given our expectation of market volatility in 2025.
Therefore, we think our portfolios have the right assets in place to help mitigate losses while positioning client portfolios for the eventual market recovery, whenever that might take place. Finally, I respectfully reiterate some of our most relevant predictions from our 2025 Capital Market Report, released back on January 2, 2025.
- “However, given there is a political regime change, we anticipate larger deficits, more tariffs, geopolitical tensions, a complicated energy transition, and persistent inflation in the economy.”
- “We anticipate a market correction (-10%) at some point during the year, albeit brief in duration.”
- “Our client portfolios are strategically designed to include substantial exposure to alternative strategies via liquid, tradable mutual funds. The allocation to these investments is adjusted tactically throughout the year, underscoring their value in providing independent, absolute returns with diminished correlation to market fluctuations.”
- “In light of elevated prevailing valuations and policy uncertainties...”
- “Our client portfolios are distinguished by a considerable diversity of asset classes, each contributing unique return and risk attributes, with the overarching aim of enhancing portfolio return stability and curtailing volatility.”