☕️ Tariffs, trade wars & your portfolio: what you need to know

☕️ Good morning!  

Tariffs aren’t just political posturing. They send shockwaves through markets, forcing industries to pivot, supply chains to shift, and inflation to stir. 

2025’s brewing trade wars between the U.S., Canada, China, and the EU are set to hit key industries, roil supply chains, and send corporate earnings tumbling. 

But where most see a crisis, there’s an opportunity to reposition. 

For investors—particularly high earners who tend to lean on stock-heavy, passive strategies—this is a wake-up call.

Where most see crisis, there’s an opportunity to rethink risk, rebalance allocations, and hedge against volatility. Let’s break down how these tariff battles alter portfolio dynamics— and what you can do about it.

📺 60 Seconds That Could Save Your Portfolio
I just dropped a YouTube Short that walks through the key investor moves in response to the 2025 tariff landscape—what to avoid, where to reposition, and how to use volatility to your advantage.

🚀 Challenging the “Set and Forget” Approach 

The standard wisdom: “Stay diversified, hold index funds, ignore the noise.”

And then the stock market experiences a volatility many aren’t used to.

Index funds aren’t neutral in a trade war. Tariffs punish global supply chains—and the S&P 500 is dominated by companies that rely on them. Apple, Tesla, Nvidia, and Amazon aren’t just American giants; they’re global manufacturers and sellers that depend on cost-efficient supply chains.

Traditional diversification assumes correlations remain stable. But when tariffs hit, historical relationships break down. A diversified S&P 500 fund is still vulnerable if the biggest companies in the index take a hit.

So, what’s the actual move here?

🚘 Look under the hood of your ETFs. If your portfolio is loaded with “broad market” funds, are they really diversified across sectors that will absorb tariff shocks differently? Or are you exposed to one macro trend?

💎 Think beyond stock markets. Commodities, currencies, and inflation-protected assets react differently to trade wars, and you should adjust your psychology accordingly.

Think about why a certain asset may move in correlation to down markets. 

One may speculate that gold, for example, isn’t just a fear trade—it’s a play on weakening fiat currencies in tariff-heavy economies. 

Alternatively, one could assume that although a cryptocurrency like Bitcoin is often viewed as a hedge against fiat, its price falling 20% may suggest it’s not yet immune to the volatility that has historically accompanied it. 

🚨 LinkedIn Live Alert

💡 Did you know? The right negotiation strategy can boost executive pay upwards of 30%—yet most professionals never ask for more.

Let’s fix that.

Jacob Warwick and I, Dan Pascone, are hosting a LinkedIn Live on April 8 at 2:30 PM on:

💰 How to structure executive pay for max earnings

📈 Tax-smart wealth strategies for high earners

🛡️ Building long-term financial security

If you’re an executive (or on your way), you can’t afford to miss this.

🔗 RSVP now: LINK

💰 Why Inflation & Interest Rates Become Unpredictable

The first-order thinking: “Tariffs make things more expensive, so inflation goes up.”

But that’s not the whole picture. The reality is a bit more chaotic.

Companies don’t absorb costs equally. Some pass them straight to consumers (driving CPI inflation higher), while others eat the costs (lowering earnings and stock valuations).

Tariffs can be deflationary in the long run. If consumers respond to higher prices by spending less, demand falls. If businesses can’t pass costs on, they cut wages and jobs—leading to lower economic growth, not inflation.

The Fed’s reaction becomes unpredictable. Higher prices would normally mean raising interest rates. But if tariffs slow down growth and spark layoffs, the Fed might actually cut rates despite inflationary pressure.

📌Keep in mind that the inflationary impact of tariffs isn’t just about prices—it’s about policy response. Investors betting on a clear inflation path might be missing the real risk: market confusion over how central banks react.

What does this mean for investors?

🌽 Inflation hedges like Inflation-protected securities (TIPS) and commodities might not be enough. If tariffs trigger deflationary slowdowns, assets that do well in an inflationary cycle (like commodities) might actually lag.

💵 Cash becomes a valuable tool. In an unpredictable rate environment, liquidity is an offensive weapon— “dry powder” lets you take advantage of mispricings in assets when the market panics.

🏠 Interest rate sensitivity matters. If the Fed is forced to pivot fast, sectors with high debt loads (real estate, tech) could get whipsawed.

🎯 Making Sense of Tariffs in 2025: Dont Overreact

A few key questions emerge: how to hedge risk and how to use volatility to your advantage.

What happens when markets overreact? The first market reaction to tariffs is usually indiscriminate selling. That’s why passive investors get hurt. 

Specifically, passive investors who emotionally exit and then buy back into comparable positions at higher prices later on. 

But after the dust settles, opportunities emerge:

1. Some companies find workarounds. Smart businesses rewire supply chains, benefiting from incentives (think domestic subsidies, new trade alliances).

2. Some countries get flooded with capital. For example, if China gets hit, Mexico’s export industry booms; if European tariffs rise, Vietnam picks up supply contracts, etc. 

 What happens when inflation surprises the market?

If the Fed keeps rates higher for longer, dividend-paying stocks and cash-flow-heavy businesses become more attractive than high-growth tech.

If the Fed cuts rates due to economic slowdown, beaten-down growth stocks might snap back fast.

Tariff-driven markets are about playing the second-order effects. The most common kneejerk move (panic-selling stocks) is usually the worst one. 

The best investors aren’t spending their careers reacting to headlines, they’re positioning for where capital flows next.

So, in short, stay nimble, but don’t let temporary macroeconomic distortions force you into emotional, reactionary investing. 

If you can, stay fluid in your asset allocation (not just stocks but cash, commodities, TIPS, and bonds) and be aware of unintended correlations (the old diversification rules don’t always apply).

Think two moves ahead (where does capital flow after the knee-jerk reaction?) and, critically, how you can tailor your short-term actions to your evolving long-term financial plan. 

Trade wars aren’t a one-way street to disaster—they’re a reallocation of opportunity, and the investors who understand how capital moves in response to policy shifts will be the ones turning volatility into long-term gains.

Stay savvy, stay proactive, and keep your financial future bright.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Security and Advisory Services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC The information contained in this e-mail message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.