Liberation Day? Not So Liberating.

President Trump’s so-called Liberation Tariff Day wasn’t very liberating for the stock market or the broader economy. As we’ve consistently said, markets hate uncertainty, and right now, we’re facing the most consistent uncertainty we’ve seen since the early days of COVID.

Our view is simple: the tariff terms announced are so extreme that they can only be seen as a starting point for negotiations. The faster those negotiations happen, the better the chances we can avoid a recession. If this escalates instead, a recession becomes more likely this year, and with it, more downside in the markets.

Why is uncertainty so bad for investing?
What ultimately drives markets is the economy, which in turn affects corporate earnings. When consumers and businesses lose confidence, they spend less. That’s exactly what we’re seeing in the latest University of Michigan Consumer Sentiment Index. Consumer sentiment and expectations dropped sharply—before the tariff announcement. So it’s fair to assume confidence may take another hit from here.

This matters because consumer spending makes up about 70% of our GDP. If people pull back, corporate earnings will be impacted, and that’s what is being reflected in the stock market.

How could Trump’s tariff plan hurt the economy?
Consumers are already stretched thin. After years of pandemic-related disruptions and persistent inflation, many households are fatigued. Confidence is falling, and if these tariffs drive prices even higher, it is a double whammy that could further slow the economy.

Will tariffs automatically translate to a 10% price increase for consumers? Probably not. Let’s use Walmart as an example. They will pressure their overseas suppliers to offer price concessions to help offset the tariffs. Walmart, as a low price retailer, will look to limit price increases and eat some of that tariff cost via lower profit margins. The rest is pushed on to the consumer. How much is absorbed by each party is unpredictable. Often the reality of price increases is not as bad as the initial fear.

So—will the economy slow?
Yes, we believe Trump’s announcement increases the risk of an economic slowdown. But it is too early to call it definitively. It depends on how far this goes. If new trade deals are stuck quickly, much of this could disappear as fast as it arrived. There is just no way to predict that and markets appear to be assuming the worst, and hoping for the best.

A longer-term view: turbulence now, transformation later?
Despite this volatility, I believe we’re on the verge of an Industrial Renaissance. The U.S. is moving toward reshoring and onshoring more manufacturing, partly for security and partly to fix the supply chain issues exposed by COVID. But this shift doesn’t mean we’ll see massive job growth. Robotics and automation will likely lead the way.

We’re also witnessing a global economic rebalancing that could reshape trade, technology, and power structures. That kind of transition brings volatility—and, often, opportunity.

Are we making any changes to your portfolio?
We entered this year with a healthy amount of cash and ultra-short-term fixed income, giving us flexibility to rebalance and take advantage of opportunities, especially when great businesses become temporarily undervalued. At the same time, we’re mindful not to catch a falling knife.

Volatility, in our view, is not something to fear, it’s something to use. It creates opportunities, and that’s how long-term wealth is built.

Your portfolio holds high-quality businesses, companies with the financial strength to weather major downturns and come out stronger. That’s the foundation of our investment philosophy: own great businesses with consistent earnings over 10+ years, strong free cash flow, low debt, high cash balances, and high returns on invested capital.

Just as important, these companies are led by some of the best CEOs in the world and operate with meaningful competitive advantages.

Lastly, we prudently diversify your assets. This approach helps manage downside risk, which is always part of investing, but it’s how we grow and protect wealth over time.

Palumbo Wealth Management (PWM) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where PWM and its representatives are properly licensed or exempt from licensure. For additional information, please visit our website at www.palumbowm.com.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information, and it should not be relied on as such.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Past performance is no guarantee of future returns.

General News

By: Adam