Podcast
Liquidation Day
Will Simpson
April 7, 2025
This past week marked a significant and painful turning point in global markets.
On Wednesday, April 2nd, President Donald Trump declared sweeping tariffs across the global economy. Trump called it “Liberation Day”, but the reality for markets is that it was “Liquidation Day”.
Markets initially were optimistic, trading up at first, but quickly after the foam board showing tariffs across various countries came out, markets began to turn. The news went from bad to worse as markets began to digest this on Thursday. By Friday, other countries (most notably, China) were fighting back with counter-tariffs. This is now a full-scale trade war with the potential to restructure the whole global economy.
How did markets respond to all of this? Not very well. Global markets, lost close to 10% of their value in two days. This week has been the biggest challenge to investors since the depths of the pandemic in 2020. As we look at the futures market, it doesn’t look good heading into Monday.
Why do these tariffs matter?
In my view, tariffs are important for 3 key reasons:
1. Market Uncertainty and Volatility
These tariffs will drive the market for the foreseeable future. This is the story that’s in control of investor expectations. Markets are seeing high risk levels across the board. This likely means more uncertainty and turbulence for the coming weeks and months. This is now an economic trade war that could change day by day with one announcement or social media post — nothing is set in stone. We are now in a risk-off environment.
2. Economic Implications
Tariffs are influencing expectations for economic growth, interest rates and inflation. All of these are being called into question now, which is why the market sold off due to panic and uncertainty. Tariffs will likely cause an economic slowdown and potentially lead to a recession. Tariffs are also inflationary, and inflation is not good for markets. This is what caused markets to turn negative in 2022. When it comes to the Fed and interest rates, a recession usually means lower interest rates to stimulate the economy. Inflation means higher rates to fight against it. So where does the Fed go from here? All of this is now up in the air and the global economy has been thrown into a state of uncertainty and turmoil.
3. Investor Strategy and Behaviour
Elevated risk is prompting investors to reassess their strategies. Tariffs are impacting portfolio strategy and investor behaviour. Investors and markets all over the world are seeing significantly increased risk. This means increased fear, uncertainty and doubt when it comes to investing, markets and the economy. It also means uncertainty around inflation, interest rates and retirement plans. Investors, portfolio managers and institutions are now shifting gears to account for this new reality. This is going to be a more challenging market environment going forward and everyone has to adapt to these shifting market conditions.
What is Aretec doing about it?
For starters, we have an investment process that is grounded in technical analysis and tactical portfolio management. Our process manages risk, but it cannot predict the future. Our portfolios change based on changing market conditions. The risk has increased substantially in the last few days in markets, so in most portfolios we have de-risked and taken a more defensive stance.
This is adding to the generally defensive posture we’ve had for some time. Our technical indicators had been showing some positive signs over the last few weeks leading into this, as the markets and investors were thinking the tariff announcement would be more toned down. Instead, the markets were taken by surprise by what seems like a worst-case scenario when it comes to tariffs.
Keep in mind that as of today, markets are deeply oversold and most sectors and individual names are already washed out. That’s not to say that markets can’t go lower from here. It’s possible given the reactions we’ve seen so far over the last two days and as we look into future markets.
Where do we go from here?
Last week was a crazy week in the markets and the Aretec Wealth team is working hard to keep your money safe. It was a very rough week for equities, but I want to emphasize that this is not the time to panic or get emotional. We are managing funds with a rational, disciplined and systematic process. Our portfolios are doing their job. Remember that we’ve experienced strong returns over the last couple of years in 2023 and 2024. The investment process we are using now is the same investment process that guided us through the turbulent markets of the last several years, including the COVID-19 pandemic in 2020.
Things may get worse before they get better. We may have additional days of really bad markets. We may see a policy response from the Fed. This was one of the worst two-day periods in the history of the S&P 500. With history as our guide, looking at periods like 1987, 2008 and 2020, we are likely going to see much higher equity markets 6-12 months from now.
This is why it makes sense to be tactical with your investment portfolio. Risk is elevated right now, so we are making defensive moves in our portfolios to raise cash and to protect and preserve capital. Most other advisors are taking a buy-and-hold, passive, do-nothing approach. At Aretec, we have taken action and are continuing to take action in your portfolio.
And remember, stock markets have gone on sale. There is an incredible buying opportunity out there in this big mess. But, it hasn’t happened yet. We need to make sure that markets and the world calm down first. Every few years, equity markets go on sale. That is when you buy.
If you have cash or funds on the sidelines that you have been waiting to invest, I would strongly encourage you to think about putting them into your portfolio. We will keep the funds in a high-interest cash savings account for now, so they are liquid and earning interest. This is the time to be ready, be nimble and wait. In every adversity, there is an equal or greater opportunity.
Please let me know if you would like to discuss your investment portfolio and strategy. Greg, Keeley, Roman or I would be happy to jump on a call to go through everything.
We are hoping for greener markets this week, but we are ready for anything.
We want you to Realize Your Wealth™.
Best,