A torrent of new trade policy announcements has turned what was already a complicated market environment into a full-fledged test of investor resilience. Earlier this month, the U.S. administration unveiled a sweeping set of tariff measures that mark the most significant escalation in trade protectionism since the 1930s. For investors, the high-stakes implications extend beyond short-term market reactions; these policies are poised to shape the economic backdrop for months and years to come.
At the center of this shift is a broad-based 10% universal tariff on all imports into the U.S., paired with steep new reciprocal tariffs that target countries based on the size of their trade surpluses with the U.S. The result is a dramatic increase in the country’s effective tariff rate—potentially rising by as much as 25% or more. While some trading partners, like Canada and Mexico, received partial exemptions under existing trade agreements, others were hit with additional levies that could reshape the global flow of goods and capital. This has resulted in the highest potential tariffs in more than 100 years, as shown below.
These measures were rolled out with speed and conviction, reinforcing a worldview that sees tariffs not as a tool of last resort, but as a cornerstone of economic strategy. Whether they will prove effective in boosting domestic manufacturing or closing the trade gap remains to be seen. What is already clear is the impact: increased costs, elevated uncertainty, and a new layer of complexity for businesses and investors alike.
The U.S. stock market fell 10.5% on April 3rd and 4th, the 5th biggest two-day decline since 1950. What has happened after past large two-day declines? Stocks were substantially higher over the next one, three, and five years, as shown below. Only time will tell if history will repeat itself.
The implications for the broader economy could be substantial. According to the IMF, a 10% universal tariff, coupled with retaliation abroad and likely targeting the U.S.’s booming services sector, would reduce global growth by 0.5 percentage points. The latest announcement puts the tariff at least double that, doubling the damage if not more so. The global economy’s one saving grace is that it was already in great shape prior to the announcement. Prior to the early April announcements, Ned Davis Research (NDR) had estimated 2025 global growth at 3.1%. With the increased tariff rates, the firm estimates a 1.0-point reduction in growth and would put real GDP growth below the 2.5% threshold historically associated with global recession. In fact, the Atlanta Fed’s GDPNow real estimate is showing negative growth for the next quarter, as shown below.
Although neither we nor the professional economists represented in the range above anticipate a negative real GDP print, the sharp increase in market volatility after the tariff announcement is understandable. NDR’s global recession probability model, shown below, indicates just a very small chance of a significant global slowdown, at least at the current moment.
From a market perspective, the road to recovery appears bumpy, but navigable. We continue to monitor NDR’s four-step process to identify market bottoms:
Markets had met the first three criteria. A retest of the March 13th lows held firm, offering reassurance that sellers may be exhausted. But the market decline after the recent tariff announcements put us back to step one: oversold, as shown below.
Until tariff news stabilizes, a market bottom could be difficult to achieve, specifically, the broad-based buying across sectors in step four. However, the administration can change its stance at any given moment, which makes watching data-driven indicators even more important. The chart below shows one such breadth thrust indicator tracking the percentage of U.S. multi-cap equities above their 50-day moving average. A signal is triggered when this percentage rises above 90%, reflecting strong market momentum typically followed by above-average S&P 500 returns over the next year. Subsequent signals require a drop to 75% or below before a return to 90%. Historically, 21 out of 21 times the indicator has flashed a buy signal, markets have been positive one year later.
Aside from watching indicators like the breadth thrust metric described above, we are also looking at more fundamental issues. As the dust settles, attention turns to how other countries will respond. Will they impose countermeasures? Will they seek negotiated exemptions? The answers will shape not only trade flows, but also market expectations for inflation, earnings, and central bank policy.
At the same time, legal challenges to the tariffs may emerge, particularly around the use of the International Emergency Economic Powers Act, which offers the executive branch broad authority but may face scrutiny in court. The durability of these measures will hinge in part on how the legal process unfolds.
And then there’s the Federal Reserve. The balance between growth and inflation has rarely been more precarious. Should recession risks rise, the Fed could be forced to act—even if price pressures remain elevated. But clarity on policy direction may take time to emerge, leaving markets to find their own footing.
For long-term investors, the message is not to panic, but to prepare. Diversification, quality, and discipline are more important than ever. While the headlines may feel overwhelming, a well-structured portfolio is designed to weather uncertainty—and even capitalize on it.
International equities, for example, are outperforming in several markets where local conditions are more favorable. Commodities and inflation-sensitive assets are showing resilience. And within U.S. equities, the rotation toward value may be just beginning.
Periods of market stress often plant the seeds of future opportunity. Our job is to help clients stay focused on what matters, remain grounded in their strategy, and navigate the path ahead with confidence. On the positive side, NDR’s contrarian indicator, the Daily Trading Sentiment Composite, hit one of the lowest readings in 20 years, as shown in the bottom portion of the chart below. Readings this low have historically been associated with above-average gains following the signal.
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Disclaimer: The information contained in this market commentary reflects the opinions of Stratos Investment Management. These opinions do not reflect the views of others and are subject to change without notice. Content in this material is intended for general information purposes only and should not be construed as specific investment advice or recommendations for any individual. Please contact your advisor with any questions or for specific recommendations regarding your own circumstances. Investing involves risks including possible loss of principal. Stratos Private Wealth is a division through which Stratos Wealth Partners, Ltd. markets wealth management services. Investment advisory services offered through Stratos Wealth Partners, Ltd., a registered investment adviser. Stratos Wealth Partners and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only; and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Investing involves risk including possible loss of principal. Some of the information contained herein has been obtained from third party sources which are reasonably believed to be reliable, but we cannot guarantee its accuracy or completeness. The information should not be regarded as a complete analysis of the subjects discussed