We understand that recent headlines surrounding tariffs have stirred concerns, and the stock market’s reaction has only amplified those worries. We want to offer some perspective during this turbulent time, to help you navigate through the noise and focus on the long-term view.
Understanding the New Tariff Structure
The current situation involves two types of tariffs:
- Baseline Tariffs: These are set at a flat 10% and affect a broad range of imported goods.
- Reciprocal Tariffs: These will be negotiated, and are not based on specific foreign tariffs, but rather trade imbalances. Their aim is to leverage better trade terms rather than remain as long-term barriers.
While the numbers may seem extreme, the intent is strategic—not destructive.
This Market Decline Is Different Than 2008
It’s natural to compare the current volatility to the Great Financial Crisis. But today’s selloff is not caused by structural rot in the system. In 2008, our financial “pipes” had rusted after years of risky behavior. The threat of a true economic depression loomed, and the system required dramatic repair.
Today’s decline is what we’d call self-inflicted—the result of bold policy shifts rather than deep systemic failure. This resembles 2018 more than 2008, when markets pulled back 20% in response to aggressive Fed rate hikes and initial tariff threats. When policy changed, the market roared back. The S&P 500 returned over 28% in 2019.
A Note on the Current Market Levels
The S&P 500 closed at the lows of the day, marking a level that coincides with a key technical support area. A significant amount of selling energy was spent to push stocks to this point. While it’s possible this support could break and lead to further downside, we believe it’s important to look at the context behind the decline.
Unlike the crises of 2008 or even the existential uncertainty of COVID-19, this market weakness isn’t due to a failing system or global shutdown. It’s driven by policy choices—tough ones, yes, but still choices that can be reversed or negotiated.
As we enter earnings season, we don’t expect CEOs to paint a glowing outlook for the immediate future. However, we believe the worst-case scenario is mostly priced into the market. If the numbers come in slightly better than feared—or if guidance is not as dire—we could see the market begin to stabilize.
Our view that stocks will rally in the second half of the year remains fully intact.
“This Time Is Different” – But Maybe Not That Different
Yes, tariff rates are higher this time, which might suggest the impact could be worse. But the shock value feels very similar to 2018. Back then, investors feared the government would drive us “off a cliff.” The panic eased when policies reversed.
We had anticipated a slower, more incremental rollout of tariffs from a potential Trump 2.0. That hasn’t happened. But just like before, we see negotiation as the ultimate goal—not permanent disruption.
A Key Difference: Fed Policy Is on Our Side
In 2018, we faced both rising tariffs and rising interest rates—a tough combo. Now, we’re in a different place: the Federal Reserve is in a position to cut rates rather than hike them. That’s a powerful offset.
We’re also hearing about potential tax relief measures from Congress, a fiscal counterbalance to tariffs. This blend of easing monetary and fiscal policy could soften the blow of trade policy on the economy.
Reciprocal Tariffs May Not Last
The reciprocal tariffs are based on trade imbalances, not actual foreign tariffs. That tells us they are tools for negotiation, not permanent economic roadblocks. As trade gaps shift or deals are struck, we expect these tariffs to be adjusted down—or removed.
Putting the Selloff in Context
Today’s market drop takes us back to September 2024 levels. While nobody likes to see red in their portfolio, a six-month setback is modest compared to previous downturns. The Great Financial Crisis wiped out six years of market gains, but the market fully recovered within the next six.
Markets fluctuate. That’s part of investing. But the long-term trend has always been upward.
Biggest Risks—and Why We’re Not Expecting Them
There are two key risks on the table:
- The President refuses to negotiate on reciprocal tariffs
- The Fed holds or raises interest rates
We believe neither scenario is likely. Negotiation remains central to the administration’s playbook, and the Fed appears more inclined to ease than tighten.
Final Thoughts
We recognize how unsettling this environment is, and that fear often peaks near market lows. But we believe the maximum downside pressure is likely behind us. More volatility may come, but this is often when opportunity begins to emerge.
As always, we remain politically neutral and focused on policy’s impact on your investments. We continue to monitor the situation carefully and are here to guide you through the turbulence.
If you have any concerns, questions, or just want to talk about your portfolio, please reach out. We’re here for you.
Sincerly,
Kessler Investment Group, LLC
All information in this presentation is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic performance data is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Certain statements contained within are forward looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Please consult your adviser for further information.
Opinions shared in this presentation are not intended to provide specific advice and should not be construed as recommendations for any individual. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.