April 03, 2025 - Markets React to Liberation Day!

Submitted by Alsworth Capital Management, LLC on April 3rd, 2025

You are no doubt aware that last evening President Trump announced sweeping tariffs on many countries, including a 64% tariff on China, 24% tariff on Japan, 20% for the European Union and 10% on the United Kingdom. The announced tariffs amount to a total of 24% on all imports to the United States. The level of announced tariff rates far exceeded what any market strategists or economists were expecting. The calculation for how the other countries have tariffed us, was also an unexpected metric and approach for viewing trade policy. Needless to say, it has interjected a great deal of uncertainty into markets and corporate boardrooms, as they grapple with the likelihood that these levies will go into force versus being negotiated away in the coming months. Markets don’t handle uncertainty well. The global stock markets sold off between 3% and 6% today, as a result of the increased risks.

Steep sell offs in a single day like this are unsettling. They are usually associated with some external event as opposed to a political maneuver. None the less, they do occur periodically. It is important to keep a level head and avoid the natural human fight or flight reaction to uncertainty. We know markets are volatile. We are coming off of two years of strong market performance with large gains frequently occurring in a single trading day. Today, markets reacted to new information and new uncertainty and sold off in a big way. Ultimately, the value of our investments will be determined by the ability of the companies that we invest in to navigate uncertainty and improve their businesses. No matter what disruptions may occur in the short term, we need to step back and ask if we think these businesses can make prudent decisions, persevere and grow over many years. I believe they can. Single day gains or declines in the price other investors are willing to trade these businesses for becomes insignificant noise in the long term value of our investments.

It is in times like today that we are reminded of the benefits of having a broadly diversified portfolio. We entered the year concerned about the vulnerability of high valuation stocks and we have positioned the portfolio accordingly. We will discuss the portfolio and our view on the markets in more depth when we send out our quarterly letter in a few weeks. But, broad diversification into value-oriented stocks, non-US stocks, bonds and Gold have benefited the portfolio year to date and in days like today. It’s not easy to hold a diversified portfolio when one narrow asset class is dominating performance for an extended period of time, but history has proven the benefits time and time again.

As always, please reach out with any questions or feedback.

Cordially,

Shane M. Alsworth, MBA, CFP®, CLU®, CIMA®

The views and opinions presented in this article are those of Shane Alsworth only

Sources: Morningstar/Ibbotson data, Ned Davis Research, BCA Research, Litman-Gregory, iMGP

*US large stocks (S&P 500 Index), US large cap growth (Russell 1000 Growth Index), US large cap value (Russell 1000 Value Index), US small stocks (Russell 2000 Index), (Developed international stocks (MSCI EAFE Index), Emerging Market stocks (MSCI EAFE EM Index), Core investment-grade bonds (Bloomberg U.S. Aggregate Bond Index), Floating Rate Loans (S&P/LSTA Performing Loan Index), US Dollar (DXY Index), Gold (Aberdeen Physical Gold ETF), Commodities (Bloomberg Commodity Index)

Disclosures:

Investments are subject to market risks including the potential loss of principal invested.

Asset Allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

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