Investors put ‘Liberation Day’ lessons to work, scarred by tariff tumult


By Lewis Krauskopf, Saqib Iqbal Ahmed and Laura Matthews

NEW YORK (Reuters) -Three months after President Donald Trump’s sweeping global tariffs led markets to plunge and then rebound ferociously, investors are grappling with the fallout from the still-shifting trade backdrop and adjusting strategies to withstand sudden policy shifts.

Among the lessons for investors from Trump’s “Liberation Day” tariff announcement on April 2, and the developments since then: Brace for surprises from the Trump administration and be flexible. Pay attention to trade as you would monetary and fiscal policy. Don’t over-react to headlines — but also make your portfolios as resilient as possible to tariff news.

“We’re used to just thinking in terms of fiscal and monetary, but now trade policy is almost like this third leg of government policy and how it affects the economy,” said Michael Reynolds, vice president of investment strategy at Glenmede.

Investors had been laser-focused on Wednesday, which marked the end of a 90-day pause Trump has placed on many of the most severe “reciprocal” tariffs he had imposed in April on trading partners. The White House on Monday delayed the start of tariffs to August 1, while telling 14 nations that they would face levies ranging from 25% for countries including Japan and South Korea, to 40% for Laos and Myanmar.

“Investors, and the market more broadly, are used to literal interpretations of announcements and what we’re realizing with the Trump administration is that is dangerous because there is often flexibility ultimately in the end result,” said Mark Hackett, chief market strategist at Nationwide. “We’ve learned over the last three months there is flexibility.”

Stocks tumbled in the days following the “Liberation Day” announcement, with the S&P 500 falling to the brink of a bear market. Stock and bond volatility spiked, with the daily equity index swings among the most severe since the onset of the coronavirus pandemic in early 2020.

But stocks began climbing back following Trump’s pause. A U.S. deal with the U.K. and a truce with China kept the market’s momentum going. Volatility measures moderated significantly as well, with the Cboe Volatility index, Wall Street’s “fear gauge”, falling to its long-term median level.

Helped by a better-than-feared first-quarter earnings season and economic data, the S&P 500 on June 27 hit a record high for the first time in over four months. The benchmark index is now up about 6% for the year.

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