Wow, what a challenging year this has been for markets!
The S&P 500 surged early and was up almost 5% near the end of February, then it dropped almost 20% over the next 6 weeks when large scale tariffs were first announced in early April. The chaos of early April led the US to announce a 90 day pause on the tariffs and markets have since rallied back into the positive for the year.
On August 1, the 90 day pause ended. The White House announced another set of tariffs targeting more than 60 nations—an act marking perhaps the starkest departure from the free-trade traditions that defined U.S. economic policy for generations.
Observers and policy experts have repeatedly described the tariff program as unprecedented—not simply for its breadth, but also for the chaotic approach. The mixture of shifting deadlines, opaque criteria, last-minute exemptions, and sudden reversals has left businesses, markets, and governments worldwide feeling whiplashed.
This is a bold and controversial strategy aimed at bolstering American industry and asserting U.S. economic dominance. Not surprisingly, there are many countries that are not happy about prioritizing American economic interests above all else.
Tariff rates are now at the highest level since the 1930s. The threat of retaliatory tariffs is a major concern. Investor fear and uncertainty could lead to capital flight and further destabilize our economy and that of the US. These policies may lead to higher inflation. America bullying traditional allies may put greater strain on international relations and potentially push more countries towards closer relations with China.
However, good companies will continue to thrive and grow. Unemployment is low and consumer spending is still reasonable. Technological advances and AI should help companies achieve greater productivity growth and profitability. If economic conditions deteriorate, central banks could help by lowering interest rates.
The world may find a way to muddle through this and find a new balance, but it still feels like this is a year when greater caution is warranted. Q Wealth portfolio managers continue to hold a significant number of options in the Q Wealth pooled funds for some downside protection … just in case this economic experiment goes sideways.
