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FMI MARKET UPDATE

Whether you’ve been watching the news or not, you’ve likely heard what the markets have been like over the last few weeks. There is certainly no shortage of opinions on how the Trump Administration is handling geopolitics right now, but we wanted to offer our take on things anyway.

Many questions are being asked of the Trump Administration, the Fed, Wall Street, etc. It’s true, the market’s reaction to such extreme geopolitical tension has been dramatic, but reactions like this are often short-lived. If there’s one thing we know, it’s that the daily moves of the market mean very little to those that have a longer-term outlook. It is, after all, simply a blip on the radar. The question we would ask does not necessarily involve the Administration’s methods, but rather the longer-term implications of such a drastic change in foreign policy. Will this near-term pain lead to long-term gains? This question came up in 2022 when the Fed began an aggressive rate-hike cycle that decimated both equity and bond markets and inflicted severe pain on the economy (all this after initially declaring inflation was just “transitory”).

A client shared some astute words with us, and we wanted to share them with the rest of you.

I think (and hope) the intent of the tariff war is twofold:

Zero out most, if not all, tariffs between the US and the other countries (such as Taiwan, which apparently wants to make a 0%/0% reciprocal agreement)
Reduce inflation rates (via, among other things, a correction in the stock market) so that the Fed is “encouraged” to drop the federal funds rate, which in turn, should drop interest rates.
- This will benefit US citizens via lower interest rates for homes, cars, credit cards, etc.
- But more importantly, it will allow the US to refinance its national debt at more favorable interest rates

Will this market correction be as extended as what was experienced in 2022? The timeline will certainly depend on how other countries respond to these tariffs and how many are willing to make deals. As of this newsletter, approximately 70 countries have reached out regarding tariff negotiations. The Trump Administration’s 90-day pause, which started on Wednesday, April 9th, will allow these countries time to negotiate.

From an investment perspective, we maintain a long-term focus. Periods like this do not cause us to panic but rather to seek out opportunities that will benefit your investments in the long-term.

If you have questions about your account or would otherwise like to schedule a meeting, please reach out to your advisor or contact our office.