What should investors should do now?
by Aaron Cirksena
— Aaron Cirksena, Founder and CEO of MDRN Capital, is a 2011 graduate of the University of Maryland, College Park, where he studied economics. Since then, he has devoted his entire career to financial planning, distribution planning, and managing client money. He first worked with multiple $1 billion teams at Morgan Stanley and independent firms, and eventually created his own independent services firm in MDRN Capital, which is revolutionizing retirement planning by offering a comprehensive range of services, including income planning, investment management, tax planning, healthcare, and estate planning, all with a greater degree of effectiveness compared to traditional providers. As a fully digital firm, MDRN prioritizes efficiency and convenience by providing remote consultations and opening a digital account.The Trump administration’s tariffs have been a hot topic in business news during the first quarter of 2025. While presented as a tool for promoting US business interests, the tariffs are prompting US companies in a wide variety of industries to prepare for price hikes and other operational pivots.
As companies prepare for what is shaping up to be a trade war, investors are also feeling the pressure to reevaluate their strategies. The tariffs have resulted in what some experts have described as “storm clouds” over the world’s financial markets. Each new update to the evolving US tariff strategy has triggered intense market movements, including a two-day free fall that resulted in the worst losses since those caused by the COVID-19 pandemic in March 2020.
The possibility that the tariffs will lead to a recession has also emerged as a looming fear for investors. Some economists now believe the US faces a 45 percent chance of a recession within the next year.
To respond appropriately to the evolving economic landscape, investors should seek to understand how the tariffs could impact their portfolios and what adjustments should be made. Investors should also explore long-term strategies that can help safeguard their retirement savings from the economic uncertainty the tariffs have introduced.
How Do Tariffs Impact Portfolios And Strategies?
The key element of the current US tariff situation is uncertainty. As Trump took office, he shared that he expected to issue tariffs as high as 25 percent against key trade partners. When the tariffs were officially imposed just a few weeks later, some were lower than initially expected, while others were paused.
The lack of clarity, coupled with the “on-again, off-again” approach, made it impossible for investors to develop a strong sense of where the Trump administration’s tariff strategy might lead. As a result, US markets experienced what can only be described as “turmoil.”
When the US tariffs took effect, countries around the world responded with retaliatory tariffs, causing markets to tumble. The US responded with more pauses and exemptions.
Some analysts have interpreted the pauses on US tariffs, along with the staggered implementation dates for pending tariffs, as a sign that they are meant to be a bargaining tool more than a restructuring of US trade policy. If that’s the case, their impact could be short-lived.
If the tariffs stick, however, investors would need to anticipate reduced earnings from companies that rely heavily on affected imports. Global brands based in the US, such as Apple, Nike, and Amazon, have already shown that they are very vulnerable to the tariffs. Other tech companies, particularly those that rely on computer chips manufactured overseas for their products, could also be heavily affected.
There could also be collateral damage to the US economy from the tariffs. For example, the energy sector was among the hardest hit when the tariffs began to take effect, which experts attribute to fears of a recession, leading to a drop in oil prices. The travel industry was also hard hit due to fears of cutbacks in consumer spending.
While analysts and advisors have historical data to show how tariffs generally impact portfolios and investment strategies, the specific tariff initiative being rolled out now seems to defy comparison. It has been difficult to predict and is playing out in a business landscape that is heavily dependent on global supply chains. Until the US strategy becomes more predictable, its ultimate impact on portfolios will be difficult to determine.
What Adjustments Should Investors Make?
From a management perspective, the wise move for this new season is shifting from passive to active management. The Trump administration’s tariffs — and threatened tariffs — have targeted a broad range of industries, including automotive, energy, and alcoholic beverages. And the retaliatory tariffs announced by other nations threaten to increase the impact.
Investors should stay closely tuned to the latest developments on tariffs and their impact, both actual and anticipated, so they can adjust their investments as needed. Updates to investment strategies can include not only divesting from categories that are suffering, but also adding new opportunities that benefit from the tariffs.
Assessing a company’s supply chain will be a significant marker in determining how tariffs will impact its earning potential. Supply chain diversification and the ability to shift production onshore could give companies an edge, making them a better choice for investors.
Considering new diversification strategies may also be necessary. Investors may want to increase their allocations to food, healthcare, utilities, and other defensive stocks to address the volatility introduced by the Trump administration’s tariffs. Shifting from international to domestic companies also has promise, but investors must keep in mind that any cutbacks in consumer spending inspired by the tariffs could also impact the performance of companies not directly impacted by them.
While bonds often provide a safe haven when volatility increases, that hasn’t been the case with the shift inspired by the recent tariffs. Bond values slid along with stocks as the tariffs began to take effect, in what some say is a sign that investors have doubts about the course the Trump administration is taking.
How Should Long-Term Retirement Savings Strategies Be Adjusted?
Retirement investors and others with a long-term focus should remember that these tariffs are currently a short-term issue. Although markets are agitated at this point, they have historically shown a high level of resilience in the face of geopolitical and economic complications.
Still, retirement investors approaching the disbursement phase of their planning may need to consider some short-term strategy adjustments. If developments indicate that tariffs will remain in specific sectors or geographic regions, investors may need to adjust their investments away from those expected to suffer as a result.
Retirement investors must also consider the potential for tariffs to trigger inflation, as this could impact their purchasing power. Retirement strategies are designed to provide retirees with a certain standard of living, but if inflation rates rise, increased costs will leave retirees with less, potentially leading to their retirement funds drying up earlier than expected.
While rebalancing can help to restructure strategies in response to increased inflation, keeping pace with retirement plans may require increasing the amount being invested. Shifting retirement dates farther into the future, which gives investors more time to contribute and less time to take disbursements, may also be necessary.
Risk tolerance is another issue retirement investors may want to revisit in light of the tariffs. Tariffs have made some asset categories riskier than they have been in the past. If investors notice trends in their returns that make them uncomfortable, they should consider meeting with an advisor to assess whether a lower risk tolerance is appropriate.
Overall, retirement investors should prioritize active management as long as the tariffs are in effect and the resulting trade war unfolds. Safeguarding retirement savings typically involves an annual review, focusing on assessing progress and making adjustments as necessary. With the volatility the tariffs have introduced, retirement savers should consider more frequent reviews that place greater weight on short-term market movements.
The anxiety among investors caused by the recent tariffs is understandable, as their impact has been significant and unpredictable. The Trump administration’s most recent statement on its tariff strategy, however, is that trade deals should be finalized by the end of May 2025. Should those deals occur, investors can expect the volatility caused by the tariffs to begin to subside.
