Tariff Tantrum

Just six months ago, The Economist ran a striking cover: a roll of $100 bills shaped like a rocket, blasting into space under the headline, “The Envy of the World.” It was mid-October. The mid-year growth scare had faded after a surprise 50-basis-point rate cut from the Fed. Markets surged—seemingly hitting new all-time highs by the day. A few weeks later, Donald Trump secured re-election, and optimism took hold. Investors were buoyed by promises of lower taxes, lighter regulation, and a pro-business agenda. Trade tensions still lingered, but the consensus was clear: the upside far outweighed the risks.

Fast-forward to Q2 2025, and things look very different. The stock market has spoken—and it doesn’t like tariffs. There’s no way to sugar-coat this: it’s rough out there.

Stocks are being sold off aggressively. Credit spreads are blowing out. Commodities are sharply lower. The VIX is above 45—a level we haven’t seen since 2020 or 2008. And the US 10-year Treasury yield has fallen below 4%—which, ironically, is exactly what the President wanted. Well, now he’s got it.

As long-term investors, we know this is the price of admission. The market goes up, and the market goes down. But let’s be honest—our lizard brains aren’t wired for this. We fear loss. We crave safety and predictability.

On Thursday, the S&P 500 fell nearly 5%. On Friday, it dropped another 6%. That’s more than a 10% loss in just two trading sessions. In fact, since the five-day trading week began in 1952, there have only been three other times the S&P fell by double digits in two days: October 1987, November 2008, and March 2020.

Were those the exact bottoms? No. But they were close. And they certainly weren’t the time to panic.

Look—I get it. This stuff is hard. Headlines scream. Fear takes over. But trying to make knee-jerk decisions in moments like this? That’s a mistake. I'm not here to tell you whether tariffs make sense or not. No one can predict what comes next.

So what should you do? Honestly? Nothing. You don't make big decisions when emotions are running high. That’s when mistakes are made. If you're invested in equities, you already made a deal. You accepted that markets don’t just deliver +27%, +24% years on repeat. That’s not how this works. Anyone who’s achieved anything worthwhile knows it doesn’t come without setbacks. The reality? Markets fall, on average, about 14% every year. That’s not a bug—it’s a feature. This moment, right now, is part of that.

It’s not about tariffs. It could be anything. That’s the purest definition of risk: uncertainty. So what do you do now? Sell? And if headlines shift tomorrow and markets bounce? You’ve locked in a loss—financially and emotionally. Selling low and buying high is not the aim of this game. Neither is market timing. The longer you stay invested, the better your odds of building meaningful wealth. Time is an edge.

For those who have been predicting a recession or lower returns—well, it seems we're here. But with this comes the potential for opportunity. This is where your plan truly matters. Every portfolio is designed around individual goals, strategies, and time horizons. If your plan has accounted for volatility—and it should have—then your next move is simple: stick to it.

That said, some adjustments might be necessary, but if you're thinking you’ve suddenly got an edge over every other investor right now, I’d suggest taking a step back. Jumping in and out of the market during these times is risky, and it's important to manage your expectations. This is when calm and clarity are essential.

Even if a recession is on the horizon, remember: the long-term game is still undefeated. Take a look at the chart from Deutsche Bank below, which shows how markets have always recovered from recessionary losses—and often exceeded previous levels.

Right now, the news is grim and sentiment is unstable. But history shows that sharp declines like this are often followed by strong rebounds. Why? Because markets are forward-looking—they trade not on today’s news, but on what they anticipate in the months ahead.

Take a deep breath, we've been here before, it's all going to be ok. I'll leave you with some wise words from the legendary Peter Lynch.

‍"Everybody in the world is a long-term investor until the market goes down." - Peter Lynch

Take the Longview.