Tariff Turbulence-Why Stocks Keep Defying Gravity
Why resilience, not bravado, is the key to navigating the second half of 2025
Mid-2025 has turned into a financial funhouse after the Liberation Day head fake and tariff pause. Markets are whipsawing, policy is bouncing like a ping pong ball, and now we face the prospect of Liberation Day 2.0. This week, Trump announced a 25% tariff on imports from Japan and South Korea, effective August 1st, sending shivers through global markets.
This is not just a headline grab. Japan and Korea are industrial powerhouses, exporting critical auto parts, semiconductors, and other high-value goods that keep global supply chains humming. Hitting them with tariffs could freeze corporate investment, squeeze margins, and strain trade alliances worldwide.
And Trump is not stopping there. The White House has sent letters to about a dozen additional countries outlining tariffs ranging from 25% to 40%, also set to take effect at the same time. Many financial headlines seem oddly relaxed about tariff war discussions. A recent MarketWatch headline pointed out that “Wall Street expects Trump to delay or soften his tariff plans, with markets brushing off trade-related volatility.”
TACO Dip Feast or heartburn?
Are FOMO investors smartly scooping up the “TACO dip” (Trump Always Chickens Out), or should we tread more carefully this year through the trade wars? We lean toward caution for now. A softer outcome could keep the rally alive, but if some of these tariffs stick to our major trade partners, don’t be surprised if the economy starts to slow by year end.
Food for Thought: In times of macro uncertainty, like today’s tariff standoffs and global growth worries, tilting toward resilience and not being overly exuberant could mean the difference between riding out volatility and getting whipsawed by it (leading to heartburn), especially if you are near or in retirement and have less room for error.
Markets Keep Running Through Fire, Flood and Tariff Shocks
Looking back, the past five years have been anything but normal. Two historic floods, two catastrophic fires, a botched CrowdStrike update that crashed 8.5 million Windows computers and grounded all airlines, and China’s DeepSeek Ai launch causing U.S. tech stocks to plummet, led by NVIDIA.
Add to that six black swan events– COVID, supply chain shocks, a historic Fed rate hike cycle, the Inflation Crash, the Liberation Crash, and the recent Israel–US bombing of Iran, and you’d expect investors to have headed for the hills. Instead, stocks have shrugged it all off and powered ahead as if chaos were part of the plan.
Maybe there’s still another 5% left in the notorious, tech-heavy S&P 500 gas tank this year to land near 10% by year end despite Tariff Turbulence. Or maybe we’re staring down a flatline or worse like the 2018 Trump trade war. Either way, the huge gains of the past two years fueled by the prospects of big tech and ai aren’t likely to repeat at those levels. Welcome to the new world order of investing, where resilience, strategy and diversification beats bravado.
Risk Reset: Stay the Course or Shift Gears?
Jon here. Clients keep asking if it’s time to de-risk or double down. My advice: don’t let relief rallies turn into regret rallies. Your financial plan, not headlines, should stay in the pilot’s seat. Investing for retirement is like flying a commercial jet on a long-haul flight. You keep moving forward through all kinds of weather and occasional turbulence, adjusting course as needed. But remember, no one parachutes out of a plane mid-flight and lands safely. Market timing isn’t any different.
For those nearing retirement, check your risk exposure. A “conservative” 60/40 portfolio may behave more like 70/30 if it’s tied to S&P 500 tech-heavy funds and you did not rebalance down from the past couple years run up in stocks. Remember how 2022 reminded us stocks and bonds can sink together as well. Diversification and discipline are key.
If someone is currently in a more aggressive 80/20 portfolio, dialing it back to 60/40 may make sense if they’re in their 60’s and nearing retirement or realizing they were more aggressive than they’re comfortable with. But swinging all the way to 40/60 is likely an overcorrection, and one that could sacrifice long-term growth unnecessarily. Rebalancing or de-risking should be part of a thoughtful, forward-looking portfolio management strategy, not a knee-jerk reaction to headlines or volatility.
Credit Spread Indicator – All Clear
Top Indicators Might Include GDP, Jobs, CPI, and Then There’s Credit Spreads. Everyone reads the tea leaves from stocks, bonds, labor markets, and inflation data, but few dial in on credit spreads, especially in the high-yield (junk) bond world. This is one of our favorite indicators to keep an eye on.
When that premium (the gap between junk bonds and risk-free Treasurys) tightens, it’s basically bond geeks yelling: “We don’t smell recession.” Today, spreads between high-yield debt and 10-year Treasurys are hovering around 2.8%, the narrowest since early 2021. (see chart) That suggests junk-bond investors are nearly as bullish as stock-market bulls, even as headline volatility swirls around tariffs and Fed timing.
That’s real. That’s telling. Unlike passive equity flows or one-off jobs data, credit spreads are a live barometer of corporate stress and market risk appetite. When they stay tight amid trade pangs and yield curve skews, it’s like a reliable weathervane in a storm. So, before you bet on a rally or batten the hatches, check spreads. If they blow out, it’s not noise, it’s an alarm. If they stay compact, there’s more runway ahead and one more reason we stress short-duration bonds with strong credit profiles to anchor portfolios against potential shocks.
Second Half Obstacles
In April the S&P 500 index technically plummeted into bear territory at nearly 20% by definition. By this week, the market has staged a dramatic comeback +24% from those lows and is up 6% YTD, but that rebound is built on a wave of assumptions: no recession, no policy relapse, and Fed rate cushions arriving on cue. (see chart)
As I typically note on cue, “Markets are manic because humans are.” Tariff Turbulence will lead to more manic behavior.
Uncertainty is the quiet investor sapper. Sluggish growth, slower capital deployment, and dampened earnings can all follow. The World Bank, OECD and others already see U.S. GDP growth halved and global expansion stunted by tariff risks. But here’s the rub: markets have remained eerily composed—if investor complacency continues, a sudden shift in tariffs could trigger sharp repricing across asset classes.
Food for thought: A growth stall, not a crash, is the more likely outcome, but still a threat to cyclical sectors. If clarity arrives in August and tariffs recede, a delayed rally could emerge. Favor businesses with flexible supply chains and low exposure to trade‑chain shockwaves. Keep a hedge on macro‑sensitive assets. We’ll chew over these sectors in our next newsletter. Consider the following three obstacles to ride out the rest of the year.
- Fed, Fiscal & Deficit Alarm Bells
The Fed is stuck between an inflation rock and a policy hard place. Core inflation remains sticky; tariffs are stoking price pressures. So rate cuts are postponed until Q4, anchoring the short end while the long end drifts higher.
Meanwhile, Congress just greenlighted the “Big Beautiful Bill,” extending tax breaks that add an eye‑watering $3–4 trillion to deficits over a decade. Moody’s debt downgrade and growing yield curve inversion are flashing: bond vigilantes aren’t idle. That’s pressure showing up in long-dated yields—and squeezing equity valuations.
- Equity’s High-Wire P/E Act:
That 24% rally looks heroic (see chart) that said, underlying data tell a different story. Forward P/E sits at 22x, the Shiller P/E is flirting with historic highs, and Buffett’s favorite indicator reads 198%, classic bubble warnings. Marketwatch’s Peter Berezin pronounces it’s a Wile E. Coyote moment, teetering on a cliff’s edge, suggesting a sudden drop could be looming.
Our takeaway? Don’t chase the rally: it might sprint faster than sanity. Expect volatility to sharpen this summer if policy shocks from tariffs or deficits evolve.
- Dollar Deflates, Gold Glimmers
Despite market drama, the U.S. dollar has slid about 10% YTD, a rare moment of weakness, not strength. It signals eroding confidence in U.S. policy durability and a renewed tilt toward global currencies. (see chart
Meanwhile, central banks scooped up 244 tons of gold in Q1, proof that even the old-school safe haven still plays a vital role. In a trade‑as‑fiscal‑weapon world, hedges and diversifiers aren’t optional, they’re a cornerstone.
Portfolio Battle Plan: What Smart Investors Should Do Now to Navigate Tariff Shocks
- Lock in income, limit spread risk.
Short‑duration, high‑grade bonds are yielding 4–5%, like a seatbelt in turbulent air. - Favor pricing power over momentum.
Focus on healthcare, energy, select industrials. These sectors absorb cost shocks and pass them on. - Diversify globally—and think gold.
Dollar weakness + geopolitical turbulence = opportunity. Allocate 5–10% to gold, plus global equities. - Play active, not passive.
Passive tracks the market. In today’s environment, that means chasing high-beta at your own peril. Instead, ride sector rotations and recession hedges.
Final Word
This isn’t about what investors hope will happen. It’s about preparing for what’s most likely. Policy riptides and structural growth currents are colliding in real time, creating a market that rewards resilience over bravado. Tariff shocks may fizzle or escalate this summer, but the key for long-term investors is the same: stay diversified, stay disciplined, and keep your portfolio positioned to ride out turbulence while capturing what’s next.
With Ulin & Co., you’re not just surviving the funhouse, you’re navigating it with purpose.
For more information on our firm or to request a complimentary investment and retirement check-up, call (561) 210-7887 or email jon.ulin@ulinwealth.com.
Author: Jon Ulin, CFP® is the founder and Managing Principal of Ulin & Co. Wealth Management, an SEC Registered Investment Advisor based in South Florida for over 20 years. As a fiduciary wealth advisor, Jon helps successful individuals, families, and business owners nationwide with multi-generational planning, investment management, and retirement strategies. Learn more about Jon and our team at About/CV.
Note: Diversification does not ensure a profit or guarantee against loss. You cannot invest directly in an index.
Information provided on tax and estate planning is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
You cannot invest directly in an index. Past performance is no guarantee of future returns. Diversification does not ensure a profit or guarantee against loss. All examples and charts shown are hypothetical used for illustrative purposes only and do not represent any actual investment. The information given herein is taken from sources that are believed to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as NewEdge Advisors, LLC does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.
