Market Moves: Continued volatility as U.S. tariffs take effect

In this video, Vanessa Welch, Empower vice president for financial insights, and Marta Norton, Empower chief investment strategist, discuss the effects of newly enacted tariffs on the financial markets. Here is a transcript:

Marta Norton: I would expect continued volatility, especially as we approach April.

Vanessa Welch: Hi there. I’m Vanessa Welch here with Marta Norton, our chief investment strategist at Empower. Markets have taken a significant hit as the administration’s new tariffs have officially taken effect. And, Marta, you’ve been analyzing these market movements very closely. Why are we seeing this sell-off?

Norton: Well, markets had largely looked through the tariff talk up to this point, assuming it was largely bluster. But yesterday’s follow through shows that tariffs aren’t merely a negotiating factor, but actually a defining feature of the America First agenda. So, it’s very reasonable to think that we could see continued volatility as investors grapple with the impact on inflation, on earnings, on growth.

Welch: Yeah, that makes sense. I was reading this morning that China has even added ten more U.S. companies to their “unreliable entity list,” restricting their ability to do business there. And you’ve been saying, Marta, for months now that these tariffs aren’t just a negotiating tactic, but potentially a longer-term shift in trade policy. So, can you talk to us about what this means for our economy and everyday Americans who are worried about their grocery bills and their investment accounts?

Norton: Well, in some ways, there’s more here for markets to grapple with than for consumers. Now, sure, I think ultimately, we could see prices move higher. Target has already suggested as much as some of these costs are passed along to consumers. And, of course, that’s coming at a point where consumers are already beleaguered by inflation over the past several years. But the markets really have to appreciate the fact that earnings may need to come down. Companies may need to absorb some of these costs, and that’s a real shift because heading into 2025, the assumption was that earnings were very strong. And in fact, valuations were quite high on expectations for earnings. As earnings come down, some of that enthusiasm may very well come out of valuations. In other words, I would expect continued volatility, especially as we approach April and have greater visibility into the breadth of the tariff program by the Trump administration.

Welch: Yeah, and that renewed understanding is likely why we’re seeing the market continue to head lower today. So, Marta, where do we go from here? Should people be making changes to their investments?

Norton: Well, listen. As we were approaching 2025, we were calling for investors to rebalance their portfolios given how strong equity markets have been, how quiet fixed income has been. And, of course, for investors who did not rebalance their portfolios, the market is doing that for them to some extent as equities come down and bonds hold the line. One of the things we’ve also talked about in 2025 is this idea of balance for portfolios. Now, a passive equity strategy is going to have a lot of exposure to the market’s biggest names, which is where a lot of that valuation risk lies. And so, we’ve advocated for investors to find some of these forgotten areas of the market, something like small caps that could provide a little bit more balance or a little bit more range to a portfolio. We still argue for balance as we look at conditions today.

Welch: And, Marta, thank you so much. You always do such a great job helping us make sense of these complex market dynamics. We know you’ll continue to monitor the markets closely for us. And we also want to say thank you to all of you for watching Market Moves. We hope this was helpful for you. Marta and I will be back on Friday to analyze the jobs report or sooner if we see another significant shift in the markets. Have a great week.

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