MARKET NAVIGATION: FINDING CLARITY AMID TARIFF TURBULENCE
Lucidity Ledger — Insights for the Learned Investor
April 11, 2025
The first quarter of 2025 has delivered extraordinary market volatility—a pattern that has intensified as we move through April.
For investors watching their portfolios during this period, the experience has undoubtedly been challenging.
Q1 2025: A Quarter of Significant Transitions
The year began with cautious optimism. Coming off a strong finish to 2024, many analysts predicted steady growth for 2025. January delivered on these expectations, with the S&P 500 gaining nearly 3% in the first three weeks. Technology stocks continued their leadership role, riding the wave of AI implementation across industries.
February introduced a significant recalibration. Inflation data came in hotter than expected, pushing the Federal Reserve (“Fed”) to maintain its "higher for longer" stance on interest rates. The 10-year Treasury yield, which had been gradually declining, reversed course and climbed back above 4.5%, putting pressure on growth stocks and sending the broader market into its first meaningful pullback of 2025.
By March, markets had largely digested the rate outlook and begun to stabilize— until President Trump announced what many describe as the most comprehensive tariff restructuring in modern American history. Unlike previous targeted tariffs, this new framework affects imports from numerous trading partners and spans multiple sectors of the economy.
April Developments: Tariffs and Uncertainty = Market Volatility
The markets are now processing these tariff implementations with extraordinary volatility. The CBOE Volatility Index (VIX) recently surpassed 50 points—a level associated with extreme market stress not seen since the pandemic.¹ Daily market swings exceeding 2% have become uncomfortably familiar, and sector rotation has been dramatic, with yesterday's winners becoming today's laggards — and sometimes reversing again before lunch.²
Some industries are positioned to benefit from reduced import competition (domestic manufacturing, certain commodities), while others face significant headwinds (consumer discretionary, retail, technology hardware). The challenge for investors and economists alike has been quantifying these impacts.
This uncertainty isn't just market noise — it represents genuine questions about global supply chains, input costs, and corporate profits. When professional analysts with decades of experience are revising their earnings estimates daily, we know we're in uncharted waters.³
What This Means for Your Financial Plan
What's the appropriate response during periods of heightened market volatility? First, it's essential to remember the purpose of having a financial plan. A financial plan is not a prediction machine, but it is a framework that accounts for precisely this kind of uncertainty—regardless of the cause.
What NOT To Do
Don't make wholesale portfolio changes based on headlines. Reacting to daily news is a recipe for buying high and selling low — the exact opposite of successful investing.
Don't attempt to time market entries and exits. Even professional traders struggle to consistently time markets. For individual investors, market timing typically underperforms disciplined asset allocation strategies over time.
Don't check your portfolio hourly. Research shows that investors who check their portfolios less frequently enjoy better mental health and often achieve better returns by avoiding panic-driven decisions.
What TO Do
Revisit your time horizon. Money needed in the next 1-2 years shouldn't be in volatile assets regardless of market conditions. For long-term goals (retirement 10+ years away), short-term volatility is your friend, creating buying opportunities.
Consider tax-loss harvesting. Market volatility often creates opportunities to realize tax losses while maintaining similar market exposure—effectively securing a tax advantage while preserving your investment strategy.
Maintain perspective. Since 1980, the S&P 500 has experienced an average intra-year decline of 14%, yet finished with positive returns in 34 of 45 years. Volatility is the price we pay for long-term returns.
Focus on what you can control. You can't control tariff policies or market reactions, but you can control your savings rate, spending habits, and adherence to your long-term plan.
Finding Opportunity in Uncertainty
While challenging markets test our emotional discipline, they also create opportunities. Companies with pricing power, strong balance sheets, and adaptable business models often emerge from economic uncertainty even stronger. The same is true for investors who maintain discipline during volatility.
Economic transitions create both challenges and opportunities. The same tariff changes creating market volatility today may generate new domestic opportunities and accelerate innovation tomorrow. History shows that periods of economic realignment often plant the seeds for the next wave of business growth.
Remember that market volatility, while uncomfortable, isn't the same as risk. True risk comes from not meeting your long-term financial objectives. A well-constructed financial plan accounts for periods of uncertainty and builds the resilience needed to navigate them successfully.
The Road Ahead
The remainder of 2025 will likely bring additional clarity as companies report earnings that reflect the new economic landscape. Markets will gradually process the tariff impacts, establishing a “new normal” that incorporates these changes.
While nobody can forecast exactly how this plays out, we know from history that markets eventually adapt to policy changes, finding equilibrium even in dramatically altered landscapes. Companies adjust supply chains, revise pricing strategies, and develop new approaches to maintain profitability.
While it’s impossible to predict what markets will do next week or next month, having a solid financial plan ensures your portfolio is robust enough to weather these uncertainties while being positioned to benefit from long-term growth. Working with an experienced advisor will help you separate market noise from meaningful developments and will provide the perspective that comes from navigating multiple market cycles. Additionally, proper portfolio construction that aligns income needs with appropriate asset allocation becomes especially important during volatile periods. The right balance ensures you can meet current income needs without being forced to sell assets at inopportune moments.
If recent market movements have raised concerns about your specific situation, consider reviewing your plan to ensure it remains aligned with your objectives. Often, the most valuable service a wealth advisor provides isn't merely a portfolio adjustment, but the reassurance that comes from knowing your financial future isn't dependent on daily market fluctuations.
During periods of significant change, adaptability and a disciplined perspective remain the most reliable assets.
¹ The VIX closed at 52.33 on April 8, 2025. The last time it surged that high (higher, actually) was in March 2020, at the start of the COVID-19 pandemic.
² The volatility in the S&P 500 in the first week of April has been wild. In only five trading days, from Wednesday, April 2, to Tuesday, April 8, the S&P closing price dropped by over -12%. On Wednesday April 9, it jumped up 9.4%. Not unprecedented swings historically, but also not at all comfortable for those of us watching.
³ On the morning of Wednesday, April 9, Goldman Sachs predicted a 65% chance of a recession in the next 12 months; less than an hour later (the same day!) they rescinded the very same forecast. This is one of countless examples showing that predictions from experts are often meaningless (or, at best, an educated guess).
This commentary is only general information and should not be construed as investment, tax, or legal advice. You should consult your own investment, tax, and legal advisors before engaging in any transaction. Past performance of any market results is no assurance of future performance. The information presented within has been obtained from sources believed to be reliable but is not guaranteed.
Do you have questions about applying these ideas to your unique situation or about anything else related to money, investments, or financial education? We are happy to help get you on track! Contact us for a complimentary, no-obligation conversation.