At the start of 2025, things looked bright. The U.S. economy was strong, inflation was cooling down, and money was flowing into American markets from around the world. People were excited, and stocks were riding high, partly driven by good news in tech and a classic case of FOMO (fear of missing out).
But that optimism didn’t last long.
From Rally to Reality
Right after Inauguration Day, talk of new tariffs began to shake investor confidence. Stocks started falling. Then came April 2nd, or what the White House called “Liberation Day,” when it announced a sweeping set of new tariffs on countries we trade with around the world.
Markets didn’t take it well.
What investors thought would be a small, focused tariff plan turned out to be much larger and confusing. It wasn’t clear if the administration was launching a real policy shift or just using it as a tough negotiation tactic. Either way, the reaction was loud and clear: stocks dropped fast, and uncertainty shot up.
Why Tariffs Are a Big Deal
We won’t dive into all the details of trade policy here, but here’s the basic idea: tariffs are like sales taxes. They make imported goods more expensive for U.S. buyers. While they’re sometimes used for strategic reasons, they can hurt consumers and allow American companies to raise prices without improving their products. In most cases, they’re just not great economic policy.
It’s hard to argue that the U.S. is getting pushed around globally—after all, we have the strongest economy in the world. We produce about 26% of global output with only 4% of the world’s population and have the fastest growth rate among developed nations. So the idea that tariffs are needed to “level the playing field” is questionable.
Will These Tariffs Stick?
Probably not—at least not all of them.
The extremely high tariffs that were first mentioned would likely hurt the economy more than help it. They could even increase the problems they’re meant to fix, like the federal budget deficit and the gap between how much we import vs. export.
And in fact, on April 9th, just a week later, the administration announced a 90-day pause on most of the new tariffs. Markets immediately bounced back. The S&P 500 jumped 9.5%, a massive single-day gain. Whether that pause was part of the original plan or a response to market pressure is anyone’s guess, but the timing feels telling.
Is This Just a Correction or Something Worse?
When markets drop sharply, the big question everyone asks is: Is this a short-term correction or the start of a longer bear market?
Truth is, no one knows in real time. Corrections are quick drops (usually over 10%) that often come and go. Bear markets are longer, deeper, and usually not recognized until they’re well underway.
Here’s what we saw this time:
- From February 19 to April 8, the market dropped 18.9%.
- One week later, we had already recovered 6-7% of that.
- The speed of the drop was dramatic, but the size wasn’t unusual.
In fact, since 1950:
- Corrections over 10% have happened in nearly half of all years.
- Drops over 20% have occurred in about 15% of years.
- The average drop within a given year is 14%.
Despite two 20%+ declines in the past five years, the market has doubled in value during that same time. That’s why staying invested matters.
Volatility Is Normal and Necessary
Market drops like this feel scary, especially when they’re tied to politics or global uncertainty. But they’re part of the deal when you invest. Volatility isn’t a flaw—it’s the price of admission.
Looking back at history, sell-offs tied to geopolitics (like trade disputes or conflicts) tend to recover quickly. On average, stocks have gained:
- +5% six months after the event
- +8% one year after
Tariffs, if they go into effect fully, could act like a $300–$500 billion tax increase. That’s big. But businesses adapt. Consumers shift their habits. And many companies will still find ways to deliver strong results.
We’re already seeing this play out in conversations with clients and business owners who are adjusting to the changes.
What Should You Do?
You don’t need perfect timing or a genius IQ to invest successfully. What matters is sticking with a plan that fits your life.
Here are a few quick reminders:
- Money you need in the next 1–5 years? Keep it in something stable and income-focused.
- Longer-term investments? Those belong in stocks and other growth-focused assets, where you can ride out the ups and downs.
If recent headlines or portfolio swings have you on edge, now is a great time to revisit your financial plan. Make sure your risk level still fits your goals.
Bottom Line
Markets move. Headlines change. But good planning doesn’t go out of style.
Volatility like this was already baked into the cake when we built your plan. If you’d like to revisit it together, we’re always here.
