Recently, I was asked about my thoughts on the tariffs and the impact it may have on a portfolio. What follows is my response:
“I see this as a giant game of chicken between China and the US. I see this causing a lot of anxiety and volatility in the market, but I’d imagine that someone is going to “blink”, a deal will be struck and no tariffs will be enacted. There will always be some issue that is of concern that gets blown out of proportion which leads to an overreaction among investors (thanks to the 24/7 media coverage). It could be the possible government shutdown, conflicts in Ukraine, North Korea, Brexit, elections, or rate hikes. All of these received the same kind of media attention over the last 3-4 years.
It’s hard to separate ourselves from these kinds of issues because we are so close to them. It’s currently happening around us. It’s on the news. It’s being discussed around the water cooler. We are seeing it translate to the performance of our accounts. And that can be scary.
Ultimately, in working with clients, I take a longer-term view on the markets. How will we look back in five years on the impact of these tariffs if enacted? I can’t help but believe that it would be a foggy memory for most investors, just like Brexit, the taper tantrum, and the government shutdown. And you take it out to an extreme example, some investors are starting to forget their fears they had during the last recession because they are seeing their account values grow significantly above the pre-recession values.
So in the grand scheme of things, I don’t see the tariffs as having a material impact on your situation in the long term. “