Resources/Weekly Insights

Volume 14, Edition 10 | March 23 - March 29, 2025

A Reason Not to Be Tariff-ied

Doug Walters, CFA

Next week, tariffs move even more to the fore (if that is possible) as implementation day arrives. Markets have been flip-flopping in uncertainty as of late. But investors should not try to predict the outcome. Rather be prepared to take advantage of any market dislocations.

Contributed by Doug Walters, David Lemire, Max Berkovich, Matthew Johnson

Next week all the tariff-talk will come to a head, and investors may get some clarity on the administration’s full plan. The on-again, off-again news flow on tariffs has created some market uncertainty, with stocks generally down on the week and inflation hedges (gold and TIPS) proving to be the best performers. Investors are wondering how to best position themselves ahead of Wednesday’s deadline. Our regular readers will already have a sense as to what we would recommend in this situation – and hopefully they’ve already done it.

Trying to predict the future, even a few days out, is a fool’s errand for investors. Short-term thinking is often shortsighted and likely to lead to disappointment down the road. That is true as we think about the tariffs this week, but just as true in any other week whether it brings big news or no news.

Consider this thought experiment…

Let’s say you are an investor who can see with perfect clarity that the tariffs that are expected on Wednesday will reduce unemployment, put upward pressure on wages, increase prices, squeeze manufacturing profits, and increase investment in domestic manufacturing. And perhaps you can also see specific segments of the market that will benefit and be hurt the most. So, you invest accordingly. Wednesday’s tariffs are announced as expected. On Thursday, geopolitical bargaining begins, and the tariff lines you saw so clearly are redrawn again. Yesterday’s winners become tomorrow’s dogs, and your prescience turns to portfolio plight.

While Wednesday’s tariff talk is a nice timely example, dealing with uncertainty is an everyday challenge for investors. But you should embrace that uncertainty, because with challenge comes opportunity. Over the long run, investors have been rewarded for taking calculated risk. If we could all see the future with perfect clarity, there would be no risk. Every investment would be risk free and investors could not expect to achieve the double-digit annual equity returns the US market has produced over the past six years even in the face of a worldwide pandemic.

As we approach the unknown of each day and each week, we once again remind investors that preparation trumps prediction. We welcome the opportunity that uncertainty provides to evidence-based investors like us. We take comfort from the knowledge that we are already prepared to take advantage of any market dislocations that come our way.

2.8 %

Core PCE Inflation

The Fed’s preferred inflation measure ticked up a bit this month.

4.1 %

Michigan 5Y Inflation Expect.

Long-term expectations for inflation are as high as they’ve been in over 30 years.

Headline of the Week

One Step Forward, One Step Back

Last month, the Fed’s preferred inflation measure showed modest progress to the 2% target. This month there is a bit of a retracement with the core monthly and annualized figures ticking higher. Even though both numbers were above consensus, markets focused on continued tariff uncertainty ahead of next week’s announcements and implications from the latest consumer surveys. Consumer sentiment declined again while inflation expectations are rising. Tough mix for the Fed to consider as markets still hope for a June rate cut.

The Week Ahead

Markets seem to be terrified of what is to come next week, with few thinking it will be terrific. That is in large part due to Tariff Day or “Liberation Day” on Wednesday, but even without that, a critical jobs report and second-tier economic reports could be consequential.

A certain uncertainty

As all the focus will be on tariffs next week, it is hard not to mention it.

If you are in the investment business like us, we can assume you have received dozens of invites to a call, a Zoom, or a Webex to discuss the impact of tariffs.
However, just as we have been cautioning investors, nothing is certain, and no one knows.
Though we know certainly that this will bring uncertainty.
While one strategy is to agonize over what may come, we prefer to prepare to take advantage of any dislocation uncertainty may bring.

A good jolt

1st Friday of a new month brings the non-farm payroll report, often called “the jobs report.”

The non-farm payroll report is expected to continue a trend of fewer jobs created from the previous month, with early estimates at around 128,000 new jobs for March, versus 151,000 in February, which would be a five-month low.
The unemployment rate is expected to adjust higher to 4.2%, with hourly wage growth remaining unchanged.
Investors will focus on the government jobs number as the government efficiency drive has removed tens of thousands of workers from the once 2.3 million strong federal workforce.
Jobs Friday is preceded by other labor reports, like the ADP employment report and the Job Openings and Labor Turnover Survey (JOLTS).
JOLTS releases tend to provide some useful data for projecting future job growth, especially the number of job openings, which was 7.74 million at the end of January.
A vehicle sales report and factory orders are out during the week as well, but will be overlooked.
The week wraps up with a speech from Federal Reserve Chairman Powell, who has been very proficient at non-commitment on his view of tariffs, but maybe he will be forthcoming with an opinion on the jobs report.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on total client assets of over $2 billion.

Overview

Disclosures

Strategic Financial Services, Inc. is registered with the Securities and Exchange Commission (SEC) as an Investment Advisor. The term “registered” signifies compliance with regulatory requirements and does not imply a certain level of skill or training.

The information provided on our website, including weekly market commentaries, financial planning articles, and other educational resources, is intended solely for educational purposes. It is designed to offer insights into financial planning and investment management, aiming to enhance understanding of financial concepts, strategies, and market trends. This content should not be interpreted as personalized investment advice or a recommendation for any specific strategy, financial planning approach, or investment product. Financial decisions are deeply personal and should be made considering the individual’s specific circumstances, goals, and risk tolerance. We recommend consulting with a professional financial advisor for personalized advice.

Please be aware that Strategic Financial Services, Inc. does not provide legal or tax advice. The content on this website is not intended to be used as such or as a substitute for legal or tax advice from a licensed professional. We advise seeking guidance from qualified legal and tax advisors regarding these matters.
Investment Risks and Portfolio Management.

The discussion of any investments on this website is for illustrative purposes only and provides no guarantee that the advisor will make any investments with the same or similar characteristics as those presented. The investments identified and described herein do not represent all the investments purchased or sold for client accounts. The selection of representative investments to discuss is based on various factors, including recent company news or earnings releases.

It should not be assumed that any investments discussed were or will be profitable. All investments involve risk, including the potential loss of principal. There is no assurance that investments mentioned will remain in client accounts at the time you view this information.

When index returns are mentioned on this site, they are provided as a general indicator of market conditions and are not representative of any client’s portfolio performance. Indices are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly. Therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.

While index returns are used as a framework to report on general market conditions, they should not be construed as an indicator of future performance of any specific investment or portfolio. Discussion of index returns is intended to provide context and insight, not to suggest that clients will achieve similar results. Each client’s portfolio is managed according to their specific investment goals and financial situation.

The opinions and any forward-looking statements expressed in the articles and videos featured in our resource center are as of the date of publication. These statements are based on current laws, regulations, market conditions, and other relevant factors, including third-party data. Given the dynamic nature of financial and regulatory environments, as well as potential changes in market conditions or economic circumstances, the information provided may become outdated or may no longer be accurate.
We rely on third-party data to form our opinions and projections, which means that these are subject to the same uncertainties that affect all data-dependent analyses. As such, we advise readers to exercise caution and not rely solely on the statements made herein for making financial decisions. It is recommended that investors consult with a professional advisor who can help assess the relevance and accuracy of the content in light of the current economic climate and personal financial situation.

Our website contains links to third-party websites as a convenience to our users. Strategic Financial Services, Inc. does not control, endorse, or guarantee the content found on such sites. We are not responsible for the accuracy, legality, or content of the external site or for that of subsequent links.
Contact the external site for answers to questions regarding its content.
The inclusion of any link does not imply our endorsement of the site, nor does it imply any association with its operators. Use of any such linked website is at the user’s own risk.