Tariff threats continue to dominate the headlines. But rather than triggering sharp, lasting selloffs as they often have in the past, the markets have recently shown a pattern of resilience: dipping and recovering within the same day and often stabilizing just as quickly.
What’s behind this unusual pattern? A phenomenon known as “tariff fatigue”—a kind of market weariness brought on by the now-familiar cycle of threats, counter threats, and constant speculation over what trade policy will ultimately look like once the dust settles. Rather than the prolonged downturns of the past, the markets today often respond to tariff news of all kinds with a muted reaction or a loud sigh of resignation. Still, the resulting volatility is real—and it can be downright exhausting for investors.
Breaking down the real risk…
It’s understandable to feel uneasy when headlines drive wild market volatility—particularly when it does so with complete unpredictability. But as we often remind clients: short-term volatility is not the same as portfolio risk.
The real risk with tariffs hinges on their ability to disrupt corporate margins, supply chains, and global growth. But while every one of these can hit certain sectors hard (think industrials, staples, automotive, retail, etc.), historically, their impact on carefully diversified portfolios is limited—and short-lived. In fact, over time, the markets have repeatedly proven their ability to adapt to trade policy shifts and eventually find their footing.
A historical pattern worth remembering…
This isn’t the first time tariffs have shaken investor confidence—and it likely won’t be the last. Here is a quick look at how markets have absorbed periods of trade tension in the past and come out stronger on the other side:
1971: The Nixon Shock
A 10% surcharge on imports was imposed as part of a broader currency realignment. Markets stumbled—but within a year, the Dow climbed nearly 15%.
2002: Steel tariffs under President George W. Bush
Intended to protect US manufacturers, these tariffs sparked a short-term dip in equities, followed by a swift rebound.
2018–2019: US and China trade standoff
A familiar story: sharp selloffs fueled by tariff threats. Yet the S&P 500 ended 2019 up over 28%—one of the strongest years in recent memory.
The pattern is clear: tariff headlines often lead to short-term declines, but the markets tend to recover as time moves on, details emerge, and investors refocus on the broader picture.
At LCM, we don’t try to predict policy headlines. Instead, we build portfolios designed to weather a range of conditions. Some holdings, like US-focused companies and infrastructure or thematic investments, can benefit when trade becomes more restricted. Others, like healthcare, technology, or companies with recurring revenue models, tend to follow longer-term trends and are less influenced by short-term policy shifts. Our strategic use of alternatives further bolsters the resilience of our portfolios.
When the noise gets louder, trust the evidence…
We believe in preparing, not reacting. The true drivers of long-term returns—innovation, productivity, earnings growth, and global demand—remain intact through most policy cycles. History and experience tell us that:
Tariff-driven declines are often short-lived.
Investors who stay the course have typically been rewarded.
Reactionary moves tend to erode value, not preserve it.
Market volatility, while uncomfortable, can also create opportunity. We regularly assess portfolios for opportunities to rebalance or take advantage of short-term market mispricing—always with your broader strategy in mind.
Above all, we’re here to help you stay grounded and on track. Not just with data, but with clarity and perspective. Whatever challenges may come—tariffs or otherwise—we’re here to help you continue to invest wisely and live abundantly.
