TARIFF-YING MARKETS!
President Trump’s Liberation Day on April 2nd was not very liberating for investors. On April 3rd, the S&P stock index dropped a whopping 5% and today another 5%. Tech stocks dropped on average 13% for the two days.
Some people are calling the Whitehouse the Walmart of stock trading: They’re constantly driving prices down!
Year-to-date in 2025, stocks have dropped 13%. Since their peak in February, they’ve dropped 12%. Is there more to go? Probably. In a typical recession, which historically happens every seven years, stocks drop an average of 30%. Then they’ve always recovered and extended their growth beyond pre-recession times.
But are we headed for a recession? Potentially, yes, if tariff implementation stifles supply chains, increases product prices, and poor consumer confidence reduces spending.
Trump is walking a tight rope with his tariff blitz, hoping for long-term structural change. Unlike his first term, in which he bragged about the stock market performance and short-term-economic growth, he promises now that current moves will ensure long-term growth. Let’s face it, half our clients think he is crazy, stupid, and evil. And the other half is giving him a chance—so far--to show what he can do. But it’s painful for everyone who is invested in traditional growth stocks. Ironically, our fixed income and utility stock investors have been doing great.
If you are so inclined, check out the following link that attempts to explain the president’s strategy. The analyst presents a rationale behind the plan, but also indicates it is far from being easy to implement or without major pitfalls. This link is:
https://youtu.be/1ts5wJ6OfzA?si=5iJWvME-O8LDXwaP
In our prior dispatch we said, “Our view is that we do not sell quality investments during temporary bad situations. As crazy as Trump’s threatened actions are, he can just as easily reverse his position, which he’s done before. And speaking of temporary situations, we put recession in the same category—temporary.”
We’ve warned several clients about the danger of being out of the market, and thereby missing rebound opportunities. Even though nobody can time the market for the best time to buy or sell, we do believe in buying when there are obvious bargains. And with the recent drops, there are many bargains, especially in the tech area.
How deep will this drop go? Nobody knows. The 30% historical recession drop is certainly possible if the tariff drama—and melodrama—continues. But this issue is man-made, more specifically Trump-made. Contrast this to the Covid nightmare when masses were dying, businesses had to close, and many thought several industries, like cruise lines, would never operate again. We believed no vaccine was in sight and that life might change forever as repeated mysterious viruses afflict the world. The S&P stock index lost 32% of its value in just a few months. However, within just four months the markets recovered all this.
Before that, we had the Great Recession in 2008. Panic ensued and prices dropped. Respected economists said that future economic growth would forever slow and that the historic annual growth of 10% for stocks would slow to 7%. Wrong. It’s been remarkably close to the 10% average since then.
Again, here are the specific bargains that are out there now and we’ll be looking to buy for our clients:
- Preferred Stock Income Fund. Now yielding more than 7.5%. Great for the person looking for long-term income generation.
- Travel Stocks, such as cruise lines and online booking companies.
- Tech stocks, especially tech funds or dominant companies like Amazon, Google, and Palo Alto Cyber Security.
On the other hand, if you believe that the long-term future really is different this time, please call us so we can discuss options for you. Our clients’ level of comfort means everything to us.
Hang in there. We continue to monitor the situation of each of our clients’ accounts and looking for opportunities.
The Dougherty Team