Markets got walloped this week after the Trump Administration dropped a tariff bombshell that went far beyond what Wall Street had penciled in. We’re now staring down the barrel of the highest average tariff rate in over a century. Global stocks? Tanking. Yields? Plunging. Fear? Palpable. But in the face of tariff turmoil, we’re staying the course with diversified portfolios and keeping the faith in ex-US equity. Here’s why now may not be the time to panic—but definitely a time to pay attention.

On April 2nd, the Trump Administration threw a haymaker at the global trade order, announcing a 10% baseline tariff on most imported goods and a bunch of “reciprocal” tariffs targeting dozens of countries. The details are dense (and honestly, already well-reported), but here’s the real kicker: once everything goes live, the U.S. will have a weighted average tariff rate of 23%. That’s not a typo. It’s the highest in over 100 years. Yes, as in pre-Great Depression levels.

So, how did the markets react? Think “nervous breakdown” more than “measured response.” Stocks across the U.S., Europe, and Asia tumbled. The S&P 500 dropped back into correction territory, down over 16% from its high. The Nasdaq? Officially in a bear market, off 21%. Small caps? Brutal—down 25%. Investors sprinted into the arms of high-quality bonds. The 10-Year Treasury yield fell more than 40 basis points to 3.9%. Translation: fear is driving this bus now.

You can already see the narrative shift on Wall Street. The concern isn’t just slower growth or higher prices—it’s both, together. The dreaded “S” word is back: stagflation. That 1970s-era cocktail of inflation and stagnation suddenly feels uncomfortably relevant.

Let’s think it through. Tariffs raise costs for businesses and consumers. Higher costs mean squeezed profit margins and lighter wallets, which ding sentiment and slow

spending. Add a trade war with retaliatory strikes (China just hit us with a 34% tariff on U.S. imports), and the odds of a recession go up—fast. Q1 GDP already looks like it shrank, thanks to a bloated trade deficit caused by companies front-loading imports ahead of the tariff wave.

So yeah, the economy’s not feeling great.

Enter Powell. On April 4th, the Fed Chair voiced concerns about the inflationary impact of tariffs. But here’s the twist: markets are already betting that the Fed cuts rates four times this year. The Fed’s still guiding for two, but between a wobbly economy and the dual mandate (price stability and full employment), I’d argue the bias is toward doing more, not less.

That’s part of why we’re not abandoning ship.

We’re not selling U.S. stocks. Period. It’s tempting—markets are off hard, and headlines are brutal—but this kind of environment punishes knee-jerk decisions. The S&P is down meaningfully, the Nasdaq even more so, and small caps have taken it on the chin. Selling here feels like locking in the pain right before the Tylenol kicks in.

On the bond side? High-quality fixed income continues to do what it’s supposed to do—act as ballast. That’s comforting. In a year like 2025, where risk assets are getting thrashed, diversified portfolios have actually held up better than many expected. That’s the value of not having all your eggs in one asset class.

It’s not all doom and gloom. President Trump hinted repeatedly at the need for more tax cuts during his April 2nd remarks. If this tariff salvo is the peak of the trade war rhetoric, and we shift into stimulus mode via tax reform and regulatory easing, that could provide a significant tailwind. Wall Street would love that.

Optimistically, we could be at the peak of trade pessimism. That is, the worst is announced, countries start negotiating, and the actual implementation turns out to be far less severe. If that happens—and it’s a big if—the markets may stabilize sooner than people think.

We also take a bit of solace in timing. The tariffs don’t go into effect immediately. The U.S. kicks off its round on April 9th, and China’s hits on April 10th. That gives everyone a few more days to maybe talk things out, or at least kick the can.

This is one of those moments where it’s easy to let fear dictate your moves. But long-term investing is about playing the hand you’re dealt with discipline, not emotion.

Could this get worse? Sure. Could it get better just as quickly? Also yes.

In the meantime, don’t let the noise shake you out of your strategy. The market’s job is to price in risk, and right now, it’s trying to digest a lot. But staying the course—especially when it feels hardest—is often what separates successful investors from the rest.

Disclosure

This newsletter is provided for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security, strategy, or product. The information contained herein is based on sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinions or views expressed are those of the author and are subject to change without notice.

Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal. You should consult with your financial advisor, tax professional, or legal counsel before making any investment or financial decisions.

This communication may contain forward-looking statements, which reflect current expectations or forecasts of future events and are subject to uncertainty and change. Actual results may differ materially from those expressed or implied.

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Investment advisory services are offered through Kevin Harwood, a registered investment advisor, and Compass Financial Management, an RIA.