Tariff Turbulence: This too shall pass, but don’t miss the buying opportunity

As of today, the markets as measured by the S&P 500 are down approximately 16.5% from their high on February 14, 2025. This decline is largely attributed to fears surrounding the potential impact of U.S.-imposed tariffs on key trading partners. The media has widely characterized this situation as the onset of a trade war.

What makes current events particularly unique is the highly public and unconventional negotiation style of the current U.S. administration under President Donald Trump, who is conducting trade talks on national television rather than behind closed diplomatic doors. This populist approach is stoking investor anxiety. As a result, we are seeing market sell-offs driven more by fear than fundamentals.

Why We Believe a Trade War Is Unlikely

We believe that much of this volatility is temporary noise. Here’s why:

• Global economic dependency: Many countries rely heavily on the U.S. market for their exports. Given this, it’s likely that a number of these nations will gradually accede to U.S. demands and work toward mutually acceptable solutions.
• U.S. willingness to negotiate: We believe the Trump administration will entertain reasonable counteroffers, and most global partners will act pragmatically.
• Early signs of compromise: The Mexican President has already stated that Mexico will not retaliate with a tit-for-tat approach but instead do what is economically prudent for the country.

These factors suggest that a full-scale trade war is unlikely. As the noise fades, we expect markets to stabilize and resume their upward momentum—perhaps sooner than anticipated.

A Correction, Not a Crisis

Legendary investor Peter Lynch once advised investors to treat market corrections as buying opportunities rather than reasons for panic. The current situation is no different. As a society, we’ve faced and overcome larger challenges in the past, and this too shall pass.

Remember, stock market corrections of 7%-10% occur nearly every year, with larger 20%-30% corrections happening every few years. While these periods can be challenging, they are part of the natural cycle of investing. What truly matters is how your portfolio performs over an extended period—typically ten years or more. Always keep in mind that investment and wealth building is a long game.

What Investors Should Do

1. Stay Invested:  We urge investors to ignore the noise and remain focused on strong, competitively positioned companies.  The best opportunities often arise when the market is declining. Many successful businesses endure short-term downturns and emerge stronger because the price drop often becomes a market overreaction rather than a fundamental decline, giving a “buy the dip” opportunity to many investors.
2. Consider Adding to Your Holdings: The current weakness in the market is an opportune time to add to your holdings. Historically, those who invest during market dips see greater returns over time. This is a strategy that has resulted positively over and over.

Tralucent has always emphasized the importance of taking a long-term approach in investing. While short-term market fluctuations can be unsettling, history has repeatedly shown that markets often bounce back and move even higher. Attempting to time the market or react to short-term volatility/moves can result in greater losses rather than gains.