Trump tariffs and market volatility

As originally appeared in The Jerusalem Post on March 14, 2025.

“When I decided to be a musician I reckoned that that was going to be the way of less profit, less money. I was sort of giving up the idea of making a lot of money. It was what I loved to do. I would have done it anyway. If I’d had to work at Taco Bell I’d have still been out at night trying to play music.” Tom Petty

All it takes is a 4% down day in technology stocks and the media is full of “stock market crash is imminent” headlines. President Trump’s announced tariffs are causing lots of volatility in global markets, as worries about slower growth, a potential resurgence of inflation, and peak uncertainty of what Trump’s endgame is, are sending investors to the sidelines.

I must say that after years of being in the financial advisory business, the number of calls that I have received after this recent market drop have been muted. Long-time clients of mine know what I am going to say and know not to panic. The few calls that I do receive from clients about what they can do in order to smooth out the volatility usually starts with my suggestion to buy a bottle of Rolaids or Tums and start popping a few of them every time you get that “feeling” in your stomach. While that may garner a chuckle, the fact is that, intellectually, investors understand that if they are investing for the long-term, there is bound to be market drops. Emotionally, no one likes losing money, and a certain sense of panic takes over.

Here are a few tips to help you navigate these current stormy markets.

Diversify

To understand this concept more easily, we first need to define the meaning of diversification. Diversification is an investment technique that uses many varied investments within a single portfolio. The idea behind it is that a portfolio of different kinds of investments may, on average, yield higher returns and pose a lower risk than a single investment. Diversification tries to smooth out volatility in a portfolio caused by market, interest rate, currency and geopolitical risks. In laymen’s terms, don’t put all your eggs in one basket. It’s important to remember that diversification does not assure against a loss.

According to Blackrock, “The foundational 60/40 portfolio, where 60% is invested in stocks and 40% in bonds, is the initial starting point for many portfolios. The exact proportion of the mix is often adjusted based on an investor’s time horizon, risk tolerance and financial goals, but the simple, proportional stock-bond combination is core to what is considered by many to be a “diversified” portfolio. The main premise for the combination is that when growth assets, like stocks, sell off due to economic slowdowns, fixed income assets like bonds typically appreciate. While stocks tend to suffer in a recession due to lower earnings, bonds can rally because central banks typically cut interest rates to support the economy. When central banks ease policy, bond yields drop and bond prices rise. This dynamic means that bonds can provide a shock absorber in the portfolio, helping to cushion overall returns when stocks are falling.” Though the Fedreal Reserve has yet to cut rates during this period of volatility, bond prices in the marketplace have been surging. This concept of bond’s cushioning the drop is stocks is actually exactly what has happened over the last few weeks.

Low correlation

What investors need to do is look at assets that have low-correlation to the broader market—here defined as the S&P 500. The purpose of combining investments with low correlation is to provide greater diversification so that not everything in the portfolio moves in tandem. Certain market sectors that currently have low correlation are utilities, healthcare, consumer products and food and beverage stocks. I am not recommending that you run out and buy them but do your own research and speak to your financial advisor to see whether she thinks they have a place in your portfolio.

Chill out

I know that it’s not easy but you need to relax and stay focused on your long-term goals. It’s important to remember that markets go up and down, and if you made a financial plan, it would have taken this type of market volatility into account. As I have written here many times, the worst thing you can do as an investor is panic and sell everything and then wait for the market to recover. The market tends to recover very quickly. Large market gains often come about in quick and unpredictable spurts and missing just a few days of strong market returns can substantially erode long-term performance. Remember the famous investing principle of buying low and selling high. Investors who panic often end up selling low.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.

Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.