Markets Sink in March Due to Escalating Uncertainty Around Tariffs
March was another rough month for the financial markets. Wall Street suffered steep losses, which added to February’s downturn. The S&P 500 and Nasdaq tumbled 5.8% and 8.2%, respectively, while the Dow Jones Industrial Average shed 4.2%.1 While several issues are responsible for the markets’ recent struggles, topping the list has been growing fear and uncertainty around the president’s tariff policies. Will these fears continue, and if so, for how long? Before we address that, let’s recap the first quarter.
When the new presidential administration took over in late January, the stock market was still at a record high. In less than two weeks, the White House announced a plan to impose new tariffs on China, Canada, and Mexico. As specifics around that plan and the administration’s broader tariff policies changed and wavered over the next several weeks, the markets became volatile.
I’ve talked many times about how investors like certainty and hate uncertainty. The markets are forward-looking, after all, so issues that help clarify potential economic trends in the future make investors happy. Issues that obscure the future make investors nervous. Tariffs are one of those issues that cloud the future because there is no way to effectively gauge their potential impact. Will they really bring in more revenue and fuel growth in the long run, and if so, at what cost to consumers and the economy in the meantime?
There are so many variables with tariffs that it’s almost impossible to answer these questions, and opinions about tariffs vary widely among economists. The uncertainty already inherent in tariffs is made even worse when the specifics around their use are unclear and ever-changing, which was the case for most of February and March.
So, again, that explains largely why the markets were so volatile in those months and finally began trending downward in late February, ending the month in the red. The markets continued falling further in March, only spiking briefly near the end of the month in anticipation of an update on tariffs by the president, which is scheduled for April 2nd.
Other Impacts
While tariffs have been the biggest issue impacting the markets, as noted, they have not been the only issue. New economic data released in March was mixed at best, but certain indicators suggested that the economy, which has been slowing for months, is continuing to slow.2
What’s more, the tech sector, which had been leading Wall Street’s growth for the better part of two years, has taken a nosedive. The exchange-traded fund (ETF), comprised of the Magnificent Seven tech leaders (Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla), had its worst month on record in March, losing about 10% of its value, putting it down by more than 15% for the year. 3
With all this said, the economy right now is still relatively strong. Despite those signs of slowing growth, the unemployment rate actually improved slightly in March, and inflation remained stable. As for the bond market, it was certainly calmer than the stock market in March, with long-term interest rates falling from about 4.3-to-4.2%, as measured by the rate on the 10-year government bond.4
While investors will certainly keep an eye on these fundamental economic issues going forward, they will also no doubt continue watching the tariff issue most closely. How the markets perform in the coming months will depend in large part not only on the president’s tariff plans but on their actual impacts, good or bad, once they take effect.
Your Portfolios
The good news for us, of course, is that when you’re investing for income, the kind of market volatility and uncertainty we’re experiencing now is likely to have far less impact on your financial strategy than if you were still investing mainly or entirely for growth. That is by design, of course, and it’s largely why you made the shift to income in the first place!
As you will see from your latest statement, those of you in our most conservative portfolios of bonds and band-like instruments went down in value by about 1.5-to-2% on average in March, depending on your individual holdings. In other words, we gave back some of our gains from the first two months, which is typical. And even so, our fixed-income portfolios are still up year-to-date by an average of about 1.3%. That means we’re still on pace, pro rata, for about 5% growth on average by year’s end, which is within our target range of 5-to-7%.
And, as I always remind you, any fluctuations up or down in your asset values are largely irrelevant when you’re investing for income first and growth second, because your interest-and-dividend return is unaffected. And if you can reinvest some of those returns in a down market, you can potentially dollar-cost-average your way to more income in the future!
So, keep all this in mind if things get even more volatile and uncertain in the coming months, which is certainly possible. Enjoy your spring and, as always, call our office at any time if you have questions!
Sources:
1 https://www.investopedia.com/dow-jones-today-03312025-11705913
3 https://www.investopedia.com/magnificent-seven-stocks-worst-month-quarter-on-record-q1-2025-11706435
4 https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm.