April 5, 2025 Market Update

This past Wednesday, President Donald Trump made his long-awaited tariff announcement, outlining measures he expects will lower trade imbalances and bring manufacturing back to the United States.  The new tariffs include a universal 10% tariff on all goods imported into the U.S., along with country-specific reciprocal tariffs as high as 49% on imports from a long list of targeted nations.

Investors had hoped the announcement would bring more clarity, something markets typically welcome.  But those hopes were overwhelmed by the size and scope of the tariffs, which many fear could trigger a global trade war and push the economy into recession.  Mr. Market didn’t hesitate to make his feelings known: stocks plunged in the aftermath of the announcement.

What is clear is that the President sees tariffs as a pillar of his economic policy, not merely a negotiating tool for other issues such as fentanyl or immigration.  What remains unclear is how America’s trading partners can get off the President’s tariff hit list.  While the White House has suggested that countries lowering tariffs on U.S. imports may receive relief, even that may not do the trick if the goal is to reduce trade imbalances—especially given that labor costs in the U.S. are significantly higher than in most of its trading partners.

What makes the situation particularly difficult for stock market participants is the President’s ability—and history—of abruptly reversing course.  This can be especially hard on frequent traders, but potentially less so for investors prepared to ride out the storm.

While headlines may drive short-term volatility, long-term success is built on discipline, perspective, and a thoughtful approach to managing risk.  At The Milwaukee Company, we’re keeping a close eye on developments and remain prepared to make adjustments as needed.  In that regard, we reduced our model portfolios’ exposure to U.S. stocks prior to the announcement and modestly increased our allocation to international equities given their lower valuations.  Rather than make dramatic changes, we have chosen to adopt a more neutral risk posture, addressing near-term uncertainty while maintaining a long-term perspective.

That’s all for now.  Invest wisely, my friends.