We recently hosted a fireside chat featuring our Chief Market Strategist, Mike McIntosh, and Managing Partner, Alan Zafran, moderated by Partner, Jesse Wood. The session focused on recent market volatility, the economic implications of the new tariff policy, and how investors might approach asset allocation during a period of heightened uncertainty.
The conversation began with analysis of the early April tariff announcement, which catalyzed a sharp market selloff. While most expected modest, targeted trade measures, the actual scope and severity of the administration’s proposal took markets by surprise. “Whereas consensus was 10% to 15% tariff rates, in reality, depending on who you asked, the proposed rate was probably at least twice that,” said Mr. McIntosh. “It turned a slowdown scare into a full-blown recession scare.”
Although a 90-day delay on the most severe measures was announced on April 9th, baseline tariffs remain in place. As Mr. McIntosh noted, “It is great to know there is a pause in place, but that pause needs to be sustained—and ideally, followed by a walk-back of tariffs from extreme levels down to something more manageable.”
Markets quickly repriced recession risk, and at one point, began factoring in as much as 100 basis points of rate cuts from the Federal Reserve. IEQ’s view is that the Fed faces a uniquely difficult challenge. Tariffs are stagflationary—simultaneously inflationary and growth-suppressing—limiting the effectiveness of conventional policy tools.
Importantly, credit markets did not confirm the level of stress seen in equities. “The S&P 500 has been flirting with bear market territory,” Mr. McIntosh observed, “but really, the move we saw was never corroborated by the more risk-averse credit markets.” That divergence informed IEQ’s decision to remain patient and avoid overreacting to headline-driven drawdowns.
Looking forward, IEQ continues to favor a disciplined, methodical approach to risk deployment. “There’s a wide range of potential outcomes here,” Mr. McIntosh said. “You want to be open to that range, constantly updating probabilities as new information comes in.”
Mr. Zafran added perspective on staying anchored to long-term goals amid uncertainty. “If I told you this watch was off 20% for sale, most people would be excited. In investing, when stocks are off 20%, people panic,” he said. “The longer you hold equities, the less likely you are to have a loss of your capital. You need to try to endure these turbulent times and have equities as part of an asset allocation.”
Fixed income also featured prominently in the conversation. Recent dislocations in municipal bonds, largely driven by retail outflows and illiquidity, have opened up opportunities. “As of today, we are beginning to see tax-free bonds trading at attractive prices for purchase—which we frankly have not seen in quite a while,” said Mr. Zafran.
The panel also explored developments in private markets. Secondaries opportunities are emerging as institutions face the denominator effect, while private credit continues to offer income with structural protections. “If current conditions persist,” Mr. Zafran noted, “we are likely to see a very significant volume of secondary assets showing up in the back half of this calendar year.”
Mr. Wood closed the session by highlighting the mindset required in moments like these. “When we have shocks like this, whether it is now, or COVID, or the Great Recession, we talk about unprecedented moves down,” he said. “But we believe the move back up to all-time highs is just kind of normal course of business.” A pointed reminder that recovery has been a consistent feature of market history, and to not let short-term volatility obscure your long-term perspective.
Clients interested in reviewing their portfolio strategy or exploring new opportunities are encouraged to reach out to their advisory team. IEQ continues to monitor conditions closely and remains committed to delivering thoughtful, long-term guidance through all market environments.
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