Advisors Sift Through Tariff Turmoil as Uncertainty Lingers

The tariff announcements spared almost no one last week — not even those adorable little penguins on uninhabited Heard and McDonald islands. 

But as the dust began to settle over the weekend, advisors started contemplating what a prolonged trade war might mean for client portfolios. Sure, advisors are in it for the long haul and timing markets especially around politics can be dicey. But the levies could be in effect for the better part of a presidential cycle, and that could wreak havoc on savings, especially for clients entering or newly in retirement. With fewer years left to wait out downturns, retirees could struggle to protect their nest eggs in the short term, and that could have lasting long-term impacts, according to a study by JPMorgan.

“I had one client reach out with concerns, but most are holding steady,” said Brenna Baucum of Collective Wealth Planning in Salem, Oregon. “I’m proactively working with clients who have excess cash, especially those dollar-cost averaging into the market.”

Chevy to the Levies

She and other advisors are beginning to put the altered economic picture into perspective. The S&P 500 opened down more than 3% on Monday and had market-watchers on a rollercoaster through the trading day, fluctuating from partial gains to below bear-market levels at times. According to an analysis by Bloomberg:

• Some $9.5 trillion in wealth was wiped out globally through the weekend. 
• The bond market was also careening Monday, with 10-year yields climbing 12 basis points following earlier tumbles.

After some hand-holding, clients are also settling into the new economic reality. Baucum reminded one worried client that they shifted required minimum distributions into cash in January, which offered some “peace of mind” and room to ride out the volatility. In fact, Baucum said the client decided to give to a favorite struggling nonprofit. Now that a major drawdown has come, there may be more clarity — and less volatility — in the months to come. (We said maybe). And don’t rule out buying last week’s massive dip, either, Baucum said. 

“If there’s advice to offer, it’s this: Tariff-driven pullbacks may be temporary, but if you’ve got long-term money sitting on the sidelines, now’s the time to make that money start working,” she told Advisor Upside. “We’re not market-timers, but we are opportunistic.” 

Everything in Moderation. A major problem is that while the S&P 500 is down significantly from February’s all-time highs, the impacts on households’ wealth are much more pronounced than in previous pullbacks, said Thomas Van Spankeren of Rise Investments in Chicago. That’s because household equity exposure as a percentage of financial assets is at record levels, leaving clients at the mercy of stock market fluctuations. An emphasis on diversification has led to less volatility for his clients this year, Van Spankeren said. 

“Educating clients not to be over-concentrated in one segment of the market is sound advice — especially now,” he told Advisor Upside.