Tariffs Trigger Market Turmoil

April 7, 2025

Financial Markets

Global equity markets declined significantly last week following the unveiling of President Trump’s long-anticipated tariff program. The breadth and severity of the proposed tariffs were far more significant than expected, targeting a wide range of industries and countries.  It is this considerable difference from expectations that led to a rapid decline in investor confidence. While framed as a punitive measure against foreign competitors, the policy has the potential to inflict substantial harm on the U.S. economy and its global standing.

Every sector suffered losses. With recession fears spiking, energy stocks led the retreat, falling 14.10%, while Consumer Staples fared “best,” declining 2.19%. Given the nature and timing of this policy shift, a quick rebound in equity markets seems unlikely unless there are rapid and material modifications to the tariff structure. As we will discuss in the economics section, the odds of a recession have increased significantly, making it a precarious time for opportunistic investors to engage in bottom fishing.

Global Economics

We’ve updated the heading to reflect the truly global implications of the administration’s new tariff regime. Tariffs, by their very nature, have a global impact—disrupting supply chains, increasing costs, and altering trade balances across borders. The current policy shift is highly destabilizing, not only for the global economy but also for geopolitics and the global order.

The timing and magnitude of this disruption is particularly perplexing given current economic conditions. The United States, as the world’s largest economy, has been experiencing robust job growth, strong corporate profits, and progress in the Federal Reserve’s efforts to combat inflation. The Fed’s ongoing efforts to reduce inflation have been showing results, albeit slowly. However, the introduction of these tariffs may hinder that progress.

Tariffs are inherently inflationary. Over the past few decades, global supply chains have been meticulously developed to maximize efficiency and minimize inflationary pressures by tapping into the full range of global resources. The sudden imposition of broad-based tariffs risks undermining that architecture. It may drive up input costs, squeeze margins, and lead to higher consumer prices, making the Fed’s job significantly more difficult.

Conclusion

The past week marks a clear inflection point for investors. The administration’s aggressive tariff policy has significantly increased global economic uncertainty and rattled financial markets. With all sectors in retreat and the likelihood of a recession rising, the investment environment has become increasingly complex.

While the U.S. economy remains fundamentally strong, the inflationary impact of tariffs could derail the Fed’s progress. It’s natural to feel uneasy during such times, but we strongly encourage long-term investors to stay the course. The current market disruption, driven by tariff uncertainty, remains highly fluid and could shift rapidly. History of other volatile and fear-inducing periods makes it clear that accurately timing these sharp turns is challenging at best and can often lead to costly long-term errors. As always, we will continue to closely monitor developments.

I.  Front End Disclosure

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of 1919 Investment Counsel, LLC (“1919”). This material contains statements of opinion and belief. Any views expressed herein are those of 1919 as of the date indicated, are based on information available to 1919 as of such date, and are subject to change, without notice, based on market and other conditions. There is no guarantee that the trends discussed herein will continue, or that forward-looking statements and forecasts will materialize.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all clients and each client should consider their ability to invest for the long term, especially during periods of downturn in the market. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown.

All investments carry a degree of risk and there is no guarantee that investment objectives will be achieved.

This material has not been reviewed or endorsed by regulatory agencies. Third party information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

There is no guarantee that employees named herein will remain employed by 1919 for the duration of any investment advisory services arrangement.

1919 Investment Counsel, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. 1919 Investment Counsel, LLC, a subsidiary of Stifel Financial Corp., is a trademark in the United States. 1919 Investment Counsel, LLC, One South Street, Suite 2500, Baltimore, MD 21202. ©2025, 1919 Investment Counsel, LLC. MM-00001701

II.  Investment Analysis

The information shown herein is for illustrative purposes. 1919 may consider additional factors not listed here or consider some, but not all, of the factors listed here as appropriate for the strategy’s objectives.

There is no guarantee that desired objectives will be achieved. 1919 has a reasonable belief that any third party information used for investment analyses purposes is reliable but does not represent to the complete accuracy of such information by any third party.

III.  Portfolio Composition

For illustrative purposes. There is no guarantee that the portfolio composition for the strategy discussed herein will be comparable to the portfolio shown here.