{"id":10058,"date":"2025-04-15T13:29:55","date_gmt":"2025-04-15T13:29:55","guid":{"rendered":"https:\/\/zacksim.com\/financial-professionals-insights\/?p=10058"},"modified":"2025-04-15T13:30:38","modified_gmt":"2025-04-15T13:30:38","slug":"avoid-sudden-moves-in-this-market","status":"publish","type":"post","link":"https:\/\/zacksim.com\/financial-professionals-insights\/avoid-sudden-moves-in-this-market\/","title":{"rendered":"Avoid Sudden Moves In This Market"},"content":{"rendered":"\n

No Sudden Moves in an Event-Driven Market<\/strong><\/p>\n\n\n\n

In last week\u2019s Mitch on the Markets <\/em>column, I offered readers a central takeaway:<\/p>\n\n\n\n

\u201cSelling out of the market today [April 5] substantially increases the chances of being whipsawed when a rally takes hold, which again, no one can know the precise timing of.<\/em> <\/p>\n\n\n\n

In the current environment, the setup is that any modicum of good news on trade will factor as a positive surprise for markets going forward, which will almost certainly trigger strong moves higher. Long-term investors simply cannot afford to miss these upswings<\/em>.\u201d<\/p>\n\n\n\n

What a difference a day can make.<\/p>\n\n\n\n

In the days following President Trump\u2019s April 2nd announcement, we learned that the U.S.\u2019s new tariff rate was projected to reach approximately 25%, which blew past worst-case scenarios and even surpassed the economically catastrophic Smoot-Hawley tariff levels of the 1930s. But by April 9th, virtually all \u201creciprocal tariffs\u201d were paused for 90 days. The \u2018modicum of good news\u2019 I referenced above was actually a big positive, with the worst-case scenario of tariffs being taken off the table.<\/p>\n\n\n\n

There is still the China story, however. Beijing initially responded with retaliatory tariffs of 34% on the U.S. (China is the U.S.\u2019s third largest export market), but in the days since, tariff rates have ratcheted higher. As I write, China has raised levies on U.S. imports to 84%, and President Trump has raised the tariff rate imposed on China to 125%.<\/p>\n\n\n\n

What we\u2019re left with today is a 10% universal tariff on all imports into the U.S. and an economic stand-off between the two world\u2019s largest economies. Which is to say, investors should not necessarily expect a durable rally from here. Volatility works both ways, and we are almost certainly not out of the woods yet.<\/p>\n\n\n\n

My advice to remain calm and avoid knee-jerk reactions has not changed. This is an event-driven market, meaning that asset prices are essentially in a day-to-day cycle of assessing economic policy announcements, trade negotiations, punitive actions, deals, and\/or de-escalation. There is not a secret set of tools investors can use to navigate this type of market\u2014in my view, this is a time to unwaveringly avoid guesswork and to keep focus on owning strong companies in a diversified, long-term focused portfolio.<\/p>\n\n\n\n

In other words, tune out the daily noise.<\/p>\n\n\n\n

Going forward from here, I again urge investors to avoid trying to guess the next move on trade or any other economic policy. Instead, focus on the big picture. Here are three key points to consider:<\/p>\n\n\n\n

1. Potential for Negotiations and Concessions<\/em><\/p>\n\n\n\n

    \n
  1. <\/li>\n<\/ol>\n\n\n\n

    As we have seen historically and in this latest installment of President Trump\u2019s trade policies, countries may look to offer concessions that can be trumpeted as a win for the U.S., which could result in permanent moderation of the announced tariffs. If the U.S. can secure a few significant negotiations, it could ease market anxiety and potentially put more pressure on China to make a deal.<\/p>\n\n\n\n

    2. Consideration of Fiscal Offsets <\/em><\/p>\n\n\n\n

      \n
    1. <\/li>\n<\/ol>\n\n\n\n

      Revenue from 10% universal tariffs could lead the Trump administration to suggest that Congress redistribute some of these funds towards fiscal easing measures elsewhere, like tax cuts, which could help bolster sentiment, GDP growth, and offer counter-cyclical measures to avoid recession.<\/p>\n\n\n\n

      3. A Starting Point of Strong Underlying Economic Fundamentals<\/em><\/p>\n\n\n\n

      Despite the tariff shock, certain underlying economic factors remain relatively healthy. The jobs market showed the hiring accelerated in March, and the unemployment rate remains at 4.2%. Households are also in strong overall financial shape, with low debt service payments as a percent of disposable income and steadily rising wages.<\/p>\n\n\n\n

      Now to be fair, I do not think the impact of 10% universal tariffs, a protracted trade fight with China, and uncertainty in general will have no impact on growth, consumer spending, and other key economic fundamentals. The longer these policies remain in place, the greater the likelihood we see a downshift in growth and possibly a recession in 2025. But again, all these headwinds could go away tomorrow. There is no way to know for sure.<\/p>\n\n\n\n

      Bottom Line for Investors<\/strong><\/p>\n\n\n\n

      In an event-driven market, one of the biggest risks an investor can take is overreacting to a news story. We have already seen that President Trump u-turned away from the most punitive of tariff measures on Day 1 of their implementation, so it does not make sense to anchor your sentiment\u2014or investment decisions\u2014to headlines and especially not to worst-case scenarios. Making investment decisions based on what positive or negative surprise might come next is not only futile, but it can also do real damage to long-term returns.<\/p>\n\n\n\n

      Going forward, I expect market volatility to persist. After all, there are still 10% universal tariffs in place and an ongoing economic standoff between the U.S. and China. More twists and turns are likely, which makes a disciplined, diversified approach the most effective way to navigate your way through it.<\/p>\n","protected":false},"excerpt":{"rendered":"

      The current event-driven market is volatile and can change quickly. Here are a few suggestions for investors to help damaging overreactions.<\/p>\n","protected":false},"author":4,"featured_media":9963,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[181,1],"tags":[],"class_list":["post-10058","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-professionals","category-mitch-on-the-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/10058","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/comments?post=10058"}],"version-history":[{"count":3,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/10058\/revisions"}],"predecessor-version":[{"id":10061,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/posts\/10058\/revisions\/10061"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media\/9963"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/media?parent=10058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/categories?post=10058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/financial-professionals-insights\/wp-json\/wp\/v2\/tags?post=10058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}