Episode 106: U.S. trade policy in review—how “Liberation Day” tariffs roiled markets

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Kevin Headland

Commentaries for general information purposes only. Clients should seek professional advice for their particular situation.

Kevin Headland

April 2nd, 2025 was presented as Liberation Day in the US by the Trump administration. The day the administration would announce new tariffs on imports, investors, diplomats and consumers of the global economy, anxiously waiting to hear the countries that would be targeted and to what extent, to the surprise of everyone. The tariff announcement was much stronger than what most thought they would be.

Kevin Headland

China would face a 34% tariff. The European Union would face 20. Vietnam would face a staggering 46%, to name a few. The S&P 500 nosedived nearly 5% the following day and was down another 6% the day after, the biggest decline since March 2020. Global equity markets all also followed suit, concerned the risk of a global recession had increased materially.

Kevin Headland

Bonds rallied on the news. Investors were left with many questions. Was this the biggest trade policy change in 100 years? How much pain was the Trump administration willing to endure? Will the US experience a recession? Will we see a reemergence in inflation? It's hard to get your arms around these questions because, frankly, it's hard to quantify and rationalize.

Kevin Headland

But we try our best as we give our thoughts. Days after Liberation Day in the US. Listen on. This is Investments Unplugged.

Macan Nia

Welcome to Investments Unplugged. My name is Macan Nia, co-chief investment strategist at Manulife Investment Management. And as always, I'm joined here, by Kevin Headland, my partner in crime. Welcome, Kev.

Kevin Headland

How's it going? Macan.

Macan Nia

It's exciting. It's, two days after that.

Kevin Headland

That's a word. That's the word for it? Yeah.

Macan Nia

You know me, I get excited during these periods of volatility. It is April 4th. So two days after Liberation Day announced by the Trump administration, which I think is safe to say took many investors by surprise. And it typically takes 1 to 2 weeks for these podcasts to be turned around through compliance and translation and design production. So be curious to see when the listeners are listening to this in a week or two weeks time.

Macan Nia

What has changed in what direction? But what we were planning to do, Kev was to do a quarter in review in terms of what happened in the first quarter of this year, in terms of performance changes we made to our illustrative portfolio. And we'll still do that. But I think we should start, and we'd be remiss not to talk about Liberation Day and the market reaction, our reaction, what investors should do in this period of, volatility, uncertainty.

Macan Nia

So to just I think before we start the discussion, markets clearly were very surprised by the extent of the magnitude maybe of the of the announcement or equity markets. So yesterday let's just talk S&P was down 5% yesterday. Single biggest drop in a day since March of 2020 was close to five. And I'll have you give me a look.

Macan Nia

It's close to 5%. It was like 4.8 today. As of time of recording it's down another 4%. We're close to a 10% correction in two days. So these are very extreme moves. US dollar is down. Oil is down materially towards $60. You have the yields falling off. Expect Tatian for fed cuts have jumped to for right now starting sooner.

Macan Nia

The markets are worried that tariffs are going to be longer lasting. Supply by the extent and that the odds of a recession in the US and globally have increased as a result. We'll get into the specifics about what we're thinking two days later after liberation. They what are you thinking, Kev?

Kevin Headland

It's funny, I read a comment on, on LinkedIn recently from an advisor. And they quoted, more like Liquidation Day, given the equity markets kind of, you know, liquidated, a lot of the assets,

Macan Nia

So that at CNBC to.

Kevin Headland

Yeah, I was like, I was like, that's a, that's a great, quip on it, but yeah. No, I think the listen, I think the markets were maybe, under expecting the announcement. Perhaps saying, oh, maybe it's not gonna be that bad. Yeah. And then it was the, the 10% base tariffs were less than the 20%. Base tariffs are expected.

Kevin Headland

But some of the retaliatory tariffs were much higher. And perhaps that is a set for a negotiation point where we'll set it higher and then negotiate afterward.

Macan Nia

So how do you quantify it. Because talking with advisors, talking with actually friends and family in terms of why the reaction was so bad and explaining to them markets pricing in the extent and I read something I forget from who. But he said it very, very well, very well in the sense that last year, in 2024, the US collected roughly $7 billion in tariff revenue, and markets were expecting a number that was fair, like a fair trade type of policy where they would, you know, increase the rates, as you were saying, the base rates either 10 or 20%, and it would bring in 200 to 300 billion.

Macan Nia

Well, the estimates are based on these tax rates across the varying tax rates across the world, that that revenue would be close to 700 billion. And some believe that this is not fair trade policy anymore. It's protectionism. And that's why markets have sold off materially globally. Markets are trying to reprice earnings expectations moving forward. But I don't think our view has changed Cab in the sense that I think you said this is a negotiation tactic.

Macan Nia

If these tariff rates are in place by the end of the year, and we've had a full year to actually have the global economy run through them, then this is a very different discussion. However, we still believe that it's a negotiation tactic. But the question today and the reality is I'd be lying if I said I knew at what level would be the pain point, but there will be a pain point.

Macan Nia

We're already seeing some pushback from Republican congressmen towards the tariffs applied to Canada. And if markets continue to sell down, there's weakness in the, U.S. economy. One would think that the Trump administration will be more likely to move forward with negotiations.

Kevin Headland

What's interesting as well, that I believe, Congress, gets prorogued or goes on, leave on April 11th and there's talk really there's there's opportunity perhaps for senators and congressmen to actually, get more feedback from the constituents on the announcements and kind of feel for what the Main Street is saying about the announcements. One of the issues you were talking about is how long these, these stay in place.

Kevin Headland

And I think this is one where does sentiment currently, as expressed by market moves, result in actual structural issues? And that's where we see the economic impacts and the potential risk for recession. And we've seen corrections in a non bear market are one thing. They happen for a going back to 1980. But corrections in recession or periods tend to lead into bear markets.

Kevin Headland

And you're like hey how where's the bottom here? And that's the key is do we say this is okay. Is it just sentiment or is it structural? And that's key right now. And given the impacts of, tariffs and retaliatory tariffs China announced overnight, another, you know, equalizing the 3 or 4% tariffs that, the Trump ministry put on China, trying to bring that back on the US, doing other, issues as well in terms of, looking at, reducing or stopping, exports of certain rare earths, doing a lot of other things to fight back as well.

Kevin Headland

So the more you have, you know, quote unquote, tit for tat tariffs, between us and other countries and other countries, the US. And the more it becomes global, as you said, that just feeds more and more to structure issues. And who ends up winning? I don't think there is any winner in the end. And that's the key is like, where is that?

Kevin Headland

Where's that a bottom? You said where does it start? Cheat okay, maybe this is not what moves you're doing, but it's hard to walk things back and say, right, okay, let's go back without kind of having to go in there. And it's this is this is not 2016, 17, 18. This is much different, I think, from a, from a, a structural issue.

Kevin Headland

And that's where I start to get a little bit, worried.

Macan Nia

I think investors are asking themselves how much I, I'm not sure how the right way to say it. There's a rhetoric, obviously, coming out of the Trump administration. And to what degree do they believe the rhetoric in terms of do they want to bring back all of this manufacturing that was set up globally back to the US, or is just, you know, let's get some of this manufacturing, whether it is pharmaceutical manufacturing, but the that the textile manufacturing, is there any interest for these type of manufacturing facilities to come back home or back on the modern American, but back to the U.S. in a sense that the there's many manufacturing jobs that have gone overseas

Macan Nia

and it's there, it's all robotics, it's automation, AI. And that's going to help the job market in the US. And I think a lot of thoughts shared with me and you, I've been texting back and forth, every day, every hour with our former colleagues, colleagues at Manulife. And it's just, you know, with all this chaos and volatility, active management keeps popping into my head.

Macan Nia

And I'll give you a couple examples going after Vietnam at that rate, that just blew my mind when I saw it because I initially thought, think about all those textiles coming out of Vietnam. So that hits them. And I work.

Kevin Headland

90, 90% tariff.

Macan Nia

Yeah. Think it's like, say goodbye to that industry. Who's going to survive with that? No. But Crocs, 44% of their production comes from Vietnam on. So you know, on they've you know, the new shoes on. You can go everywhere. It's a new shoe brand.

Kevin Headland

Roger Federer I'm not that cool.

Macan Nia

No, it's not a cool thing. My parents have ons like I have ons. They're not cool. But it's a new shoe brand. You've seen them. Once you Google a year, you've seen them. 80% of the production clubs are Vietnam, Lululemon 40%, Nike 44%. These companies are going to be decimated.

Kevin Headland

It's an anchor. Nike. I never knew not how to pronounce.

Macan Nia

I don't know what it can. No, I don't know. But I think again, these companies cannot survive with these type of tariffs. I think there will be room for negotiation with these tariff like with these type of companies to say, okay, you okay? If Lululemon builds a manufacturing facility in the US, can we skirt some of these tariffs?

Macan Nia

I think there's going to be a lot of this type of negotiation potentially. But active management before going into this, I know our managers, we're looking at the companies that they own okay. Where's their production. Where are their customers. There's an example yesterday and I forget the other. It's one of those one is Dollar Tree and I forget what the other one American equivalent is, is skip my mine regardless.

Macan Nia

One sorry.

Kevin Headland

Dollar General.

Macan Nia

Maybe it's Dollar General dollars, those Dollar Tree, but those are few.

Kevin Headland

Big U.S. dollar stores.

Macan Nia

So it must be those two. There's a variance between where the production is the one that has more of their product, much more of the production in the US was only down 3% yesterday. Were the one that has a production coming out of Asia or China. They were down 11% once, once I was checking. So I think the markets, even if there are there's going to be going to be semblance of tariffs.

Macan Nia

But the markets are going to reward those companies that have more domestic production and perhaps maybe penalize those that have, less production. So active management, we always say active management is important, but you're seeing real world examples of it, even despite the, I want to say, bloodbath. But it does seem like.

Kevin Headland

That wash out.

Macan Nia

The washouts. Nice. There is going to be winners and losers as we navigate this one.

Kevin Headland

Hundred percent, right. You know, you go back to what you're saying and saying, okay, the the amount of production for certain businesses that are overseas and much of was due to cost and input costs and low labor costs. It's not to say that they, you say, can't survive. The perhaps harsh is that what is the what are the repercussions.

Kevin Headland

So the repercussions are can these companies pass through the increased cost to their end consumer? Do they have the ability to do that? Do they eat some of this these increased costs? If that happens, that's margin compression and margin pressure then that feeds through to valuation okay. What are the actual growth metrics for these companies. And it's all reset.

Kevin Headland

And that's we're right now in a resetting environment where investors are reacting to news. Well we've seen this for quite a while. It is sell the news get out pause reflect then and analyze. And then determine whether we should get back in broadly or specifically. Like you said, active management. That's the good news story right now, I think, is that looking out on a one, two, three year plan, there's opportunities.

Kevin Headland

We will look back at this at some point and say this was a good opportunity to get in. I was on calls as you were yesterday, talk with, advisors and our internal sales staff. And it kept saying, what would you say? I said to clients. And I kept saying, you know, this is what time when we need to review our financial plan as an investor, what is your financial plan?

Kevin Headland

Where's your goals? If you were invested in US equity securities, for example, or the last two years, you've done phenomenally well. This is perhaps eating into some of the gains. You're unlikely unless you've just bought into the peak at the end of this year or last year. This is like a just a pullback of gains you've made. Let's pause.

Kevin Headland

Let's reflect. Let's review. And I think that's important. Were instead of just make a knee jerk reaction. Let's review our plan and set what the plan is going forward. So okay when do we get back in. We've done studies on on the VIX for example the volatility index when volatility hits above 30. What are we. What does our historical data say.

Kevin Headland

It suggests getting in and with a forward view of 1 to 2 years out.

Macan Nia

So you mentioned the VIX. The VIX on April 4th or on Friday breached 30. And that seems to be the magic number 30 when it goes north of 30 historically has been a good opportunity for investors. I think we're at 37 today going back through history since the 90s when the VIX hits. So let's put some numbers to this.

Macan Nia

When the VIX reaches 30, the one year forward return on average is 22% ish. The two year cycle pardon.

Kevin Headland

For the S&P 500.

Macan Nia

For the S&P 500. Yes. And then the two year forward is 15%. The key cap. The key thing here as you mentioned we are on the S&P 500 as of today. We are with today's move in correction territory on a calendar basis for the S&P 500, we're off 15% from the highs that we set in February. How do we allocate money like what are markets pricing.

Macan Nia

So historically 20% bear market in a calendar year return. So we still have room to run from that from these levels is a mild recession historically. And if you go, you know, worse than 20% I got 30 plus percent. That's a material recession in the US today. Despite all the challenges. The tariffs, if they're in place today, were great for the global economy.

Macan Nia

There's still some seedlings that we have to be optimistic about. It's hard to see through the chaos, but there's some nice positives that have developed okay. Markets have got crushed. Oil has got crushed. It's at $60. That is stimulative. Moving forward. Yields have got crushed. That's stimulative for the economy. The US economy moving forward. Now in this stage two fed cuts.

Macan Nia

Now we're at four. That may be stimulative for the global economy or US economy but maybe stimulative for risk assets once we get through this tariffs. And I'm seeing and sort of want to.

Kevin Headland

Get into the end of by end of 2025 currently. And that's still mature for fed cuts by 2025. Is currently priced in.

Macan Nia

Yeah with the first ones I think starting in May now right.

Kevin Headland

Yes. If it was and.

Macan Nia

Then US dollar down two. So these are positive things. Once we get through this tariff noise. Those are positive things that will, you know, help support the US economy and global economy. Because yields are falling. Oil fund globally as well when we move forward. But the tariff thing is front of mind as it should be. But it's also important to note that this time is not different.

Macan Nia

We've had periods like this before.

Kevin Headland

The, sorry, the first rate cut is still fully priced in not until the June meeting. So the next meeting is May 7th, the June 18th meeting. That's one of the next or the furthest.

Macan Nia

What's the odds of May 7th?

00;18;00;02 - 00;18;08;27

Kevin Headland

Only 45% right now. So less than a 5050 point flip for for the next meeting, which is May, which is a month from now. That could change materially.

Macan Nia

That's one over the next. I look this morning it was 60%. But I think Jerome Powell said something and he said that, oh, you know, this just shows you how quickly those expectations could change. Well I shook up this morning and it was higher. And then I think Proba Jerome came out an hour ago and was talking about the economy about in terms of cuts.

Macan Nia

And he said that going back to this phrase again, inflation's transitory. So I'm having nightmares again, Kev. I think maybe that increase that or decrease that a bit, but

Kevin Headland

Well, that's you know, you can go back to that and say, I'm looking, you know, some economic data came out. We had nonfarm payrolls came up, come out today, fairly strong, stronger than expected. So there's.

Macan Nia

Not a month ago.

Kevin Headland

Like that's to say, but at least are supportive. We're not starting from week base. Yeah. So it's, it's a it's a very solid base that we're starting off of now. What happens going forward. And and that's where the Federal Reserve is looking saying let's be a little patient here. Let's make sure we understand things. And I think what's important for us to say is there's time before we see the results of these tariffs through the hard data, meaning jobs data, inflation data, economic growth data, we're going to see sentiment and what we call soft data.

Kevin Headland

Yes, that is going to get really bad in the near term. Even before this, the, fear Greed index on CNN was already at extreme fear given the sell off year to date. There's my quarter end of the S&P 500 and Nasdaq. And this is just adding to that. So we're already at sentiment that was already fairly weak.

Kevin Headland

Yet structurally the base is still solid. Let's see the impacts, going forward from that. And I think that's where are you back to active. And you could say and say, look at the companies and look at the businesses and see what is the impact of them. Perhaps maybe some. We have to readjust the price. But once you get with these corrections and, you know, I said wash out or, you know, get that proverbial baby thrown in the bathwater against a knee jerk reaction.

Kevin Headland

There's a lot of passive investment. So people get out there is, indiscriminate selling. So the good and the bad gets sold. That could be a very good opportunity for investment in companies. They can look oversold through sentiment. And this is one where, as I was talking, one of our active managers yesterday, Mike Scanlon, and I was kind of geography.

Kevin Headland

I was like, you know, do you get excited about this? You know, this time when you had no volatility for us, two years, since you're a very little volatility, active managers enjoy this. It's an opportunity for them to, prove their worth and find these, golden nuggets, as you like to say, sometimes in the markets. And you don't get very often where you get these opportunities.

Macan Nia

No, these I described these type of and I hope we get a better market. Like I will be the first one. I think is very healthy.

Kevin Headland

Because you have cash ready to be deployed. That's why.

Macan Nia

Oh, it's because think about it from an asset allocation perspective. For a typical Canadian investor or an investor, you're 6040. So you have 40% bonds. If you're in the right area of of the bond market rate, higher quality credit, higher quality sovereigns, you can use that as a source of cash. So you don't even need cash to be excited about this opportunity.

Macan Nia

I think to what's happened with the yields coming down in May give the Trump administration more flexibility from a deficit perspective, I guess the like for every one basis point basis, point decline in the ten year it if they see an equal a $5 billion in interest savings for that year. So think about how much the ten year has declined.

Macan Nia

So even with yields coming down that challenge that the Trump administration is focusing on in terms of deficits is being helped by this. Yeah. You said this finally. It's like a times like this. These are the golden nuggets. These are the bear markets. And why investors should get excited is because this that that this the data suggests that if you're down 1020 especially if we start trending more lower 20%, if you believe we're going to get a mild recession, that's not that there's certainty in any given year.

Macan Nia

There isn't. But the you know, how be certain about your return expectations. I'm much more comfortable investing if markets are down 9 or 10 to 20% from being certain about my return profile, then I would have starting the year right. Markets near all time highs, valuations stretch. There's more uncertainty in those. As crazy as this may seem, I feel like there's maybe more from an economic perspective.

Macan Nia

Sure, there's, some uncertainty out there, but as markets sell off, I actually feel more certain about my return profile during sell than near all time highs.

Kevin Headland

Well, it's mathematical reasoning, but when you look at valuation, you're saying, okay, over time equity markets go up. And that's just a normal aspect of the capital markets. Because why would any individual invest in securities of a company? If you don't think over time it's going up. It doesn't make sense. So over time capital markets equity markets do go higher.

Kevin Headland

There's a patient game. You have to have a game of patience right now. If you have you know, you need money in the next year. This is not enjoyable period of time. If you are able to withstand the short term pain and short term volatility, you have a longer time horizon. I was kind of joking with our internal sales team in Toronto yesterday and saying, you know, this might be your oh eight.

Kevin Headland

You know, you remember that you you started. Why would you rather.

Macan Nia

See that that's not even.

Kevin Headland

Close to.

Macan Nia

The grapevine it's or.

Kevin Headland

No, but I'm, I'm saying if it if the markets keep going down like there's rare periods of time for younger investors and one times to get into the market. Yeah. Oh for sure. Under Covid it was here and gone. But you hit the floor at 35% down by the spread or right here for.

Macan Nia

The terrifying thing could be very similar to Covid, right? The Trump administration could come out tomorrow and have a change of heart. And you would have a snap back right here point. Because the backdrop was in week going into here. And then now you have lower yields, oil prices, lower U.S. dollar. You could get a snap back if that's the case.

Macan Nia

I know what you mean. In terms of the real yes, wealth is created by compounding wealth. It's also created by taking advantage of extreme moves to the downside and Covid was a perfect example. Anytime you get a bear market, those are the examples. So with all that being said Tab, we have an illustrative portfolio. We the way we look at it is we look at it through the lens of a balanced investor, 6040.

Macan Nia

We are 5050 essentially. And we given, you know, the sell off that happened going into quarter end. We decided to, you know, dabble our toes back into increasing our equity weight to increase our equity weight, taking out of bonds. You texted me the next couple are oh. And keep getting the name wrong. Liberation day laughing they go, why didn't we wait two days?

Macan Nia

We should have. And you know, I, as I said, it just shows you day to day around those moves. How many times? It just shows you also those. You know how we always get these kind of do your returns. They can be influenced by 1 or 2 days. Right. Like you we bought on March 31st. If you would have waited two days, that 5% makes a makes a difference.

Macan Nia

But the key thing is the way we're looking at it from an investment perspective is once we get out of this because we believe we're going to get out of it, what's our illustrative portfolio going to look like? We don't want to be underweight equities. We want to perhaps maybe be above that 6040. That was the first salvo in a series of decisions we'll hopefully make in terms of increasing our equities.

Macan Nia

And we typically make changes quarter end. We have to buy as.

Kevin Headland

I said that's yeah that's our rules. We have rules that we set. There are exogenous factors. If there is a material like bear market it makes it.

Macan Nia

Go into a quarter.

Kevin Headland

We try and put ourselves in the shoes of an advisor and advisor who is not discretionary, is not going to make, you know, a court allocation in my review at a quarter end, they might even be known quarter quarterly. I think that's a key for us as we try and make those moves. But if we do get a 20 plus percent pullback correction, bear market, even non-discretionary advisors, it makes sense for them to act.

Kevin Headland

And, look at reallocating portfolios. And I didn't hear you. I know if you mentioned, but we were very concerned with coming in at 5050 well underway equities. So this is kind of a step back to getting closer to neutral. And if we continue getting pullbacks in the market will be layering in cost urging for example, to get into that 64 neutral.

Kevin Headland

And if we keep pulling back you add more or you add on weakness. That is what you want to do. You want to buy low, sell high and add support. I think what we're doing is, is here is is trying to get back in that, illustrate portfolio, get back to neutral. And then if there's opportunities to come overweight in equities.

Macan Nia

Yeah I think if we get a bear market it's very easy to see why we wouldn't be overweight equities. Right. Like maybe perhaps 6535. And if we go down lower keep taking out of bonds and adding equities I know we have limits, as do many advisors in terms of it is in terms of 6040 portfolio. You know, a quote, conservative advisor or client, how much equities they can own.

Macan Nia

But if you don't have those restraints, if you keep going down 2530, you keep Larry. And I always say, if you're down 30 plus percent, you're leveraging your house. Yeah, we've had multiple examples. I have I went through that exercise of going back to the 50s and looking at bear markets.

Kevin Headland

Yeah.

Macan Nia

And we've had many periods where you were down 40 to 50%, the 74 like 70, 70 fours like that severe.

Kevin Headland

You're saying you're seeing many, many quantify that.

Macan Nia

I want to say there I'll tell you in two minutes.

Kevin Headland

I think I like x periods of big bears and we call them big bears and baby bears. And essentially what we did is looked at the key for us is, is the market sell off in a recession or not or as a result of a recession or not? Is it sentiment or structural? Well, keep going back to that.

Kevin Headland

I think now that's the key is when we get market pullbacks over the next months, quarters is a recession or not. And that will definitely, impact decision making in terms of where the Allergan went allocate.

Kevin Headland

you know, this is one of things it's interesting we were talking about this recently and say, you know, we're bringing back stuff that we've we've done research on in the past because we've said this many times before, history doesn't repeat itself. But does Ryan write great Mark Twain quote? It's understanding, not see what happened last time.

Kevin Headland

What's going to happen this time? It's more about we've been here before. Let's look at the environment. What's different, what's the scene. But there is aspects of periods where we've seen recessionary bear markets, recessions on average only last, six months. So, you know, one year forward, you're already coming out of recession. Markets tend to bottom in the middle of recession.

Kevin Headland

So if you're adding when markets pulled off during recessions, that's been proven to be a strong returns one year or two years out.

Macan Nia

So for example,

Macan Nia

let's go back.

Macan Nia

So we had 1 in 1958 down 28%. And we use round numbers. Yeah 61.

Kevin Headland

And SP 500 index returns.

Macan Nia

Yeah. So 58 we had a 22% decline 61 2866 2270 was a 36 7374 was a big one right. We had GDP decline of 3.2% from its peak. Does a very severe recession. And you're down 48%. Then you had 1 in 7620. Then 1980 recession was a big recession. -2.2% was down 3087 market crash. You're down 33. Roughly 34%.

Macan Nia

Dotcom down 50. Yeah. You know, it's it's not funny. The most recent ones usually it's a baby rising.com 50. Great financial crisis was the next 157 European financial crisis whatever 20 Covid was obviously 34 and in 2018 bear market. So when you're like you said, the big bears in the baby bears, the baby bears, or those bear markets that happen outside a recession for whatever reason, they hit that 20 to 22% decline and then they come back up.

Macan Nia

It's those more big bears that you have to be more worried about. Was more material recessions where you're down 30 plus percent.

Macan Nia

again, as I think sometimes it's important to take a step back, put on a rational, pragmatic hat. It doesn't guarantee that you're going to get the answer. But I think it helps you. You have to increase the odds by removing the noise.

Kevin Headland

One of the interesting things you said about, you know, the more recent events being bigger drawdowns, and I often allude back to the 87 Black Monday and it wasn't Black October, it wasn't black 87, wasn't black 88. And one thing, it didn't exist back then that exist today, social media and also more do yourself investors. It's it's that that immediacy of being able to make trades in 87.

Kevin Headland

Unless you were in finance, you really didn't know until you follow the news and saw the newspaper the next morning pretty much that, you know, something happened. And I think that that really impacts and that sentiment really impacts the down moves, but also works on the opposite side as well. And sentiment moves to the upside. So when and there will be a point where sentiment changes.

Kevin Headland

We don't know what the narrative is or the catalyst, but there will be a point where we bottom and Senate move higher. And again, as we said before, it makes sense to be, taking advantage of something to sell offs over the longer term. And your financial plan is longer. This is it could be a great opportunity, to get back into the markets.

Kevin Headland

Yeah.

Macan Nia

I'm looking at the moves for 87. So the market crashes on the Monday right? Yeah. So on the Thursday you're down 11.5% for the year. And then on the Friday you had a 5% sell off. And then boom, on that Monday you had a massive like 70% sell off in a day. Yeah. So I guess the circuit breakers are why I don't even if there's a 7%, it's 15.

Kevin Headland

They said they've changed a few times. Terms of the market closing depending on on levels.

Macan Nia

Yeah. I think a friend was telling me yesterday was they got they they have three of them and extreme is 25. Imagine a 25% drop in a day. Know that's when you really back up the trucks. But but you know what kind of I think that's maybe a good I think that's maybe a good place to pause in terms of this podcast is, you know, there's a loss.

Macan Nia

How do we end this cough? Because there's a lot going on. And the news, as you said, it is almost it is on a minute basis that we're hearing different things. I think it's important for investors. And you you mentioned that in the sense that gone going through these things, I maybe were just much more calm because we've gone through multiple bear markets, whether they're baby bears or big bears.

Macan Nia

Ray, financial crisis was scary. Yeah. I took a screenshot on my I know you did two of the trading day yesterday. It's a unique day having major indices down 5%. Think back to the great financial crisis. I was taking pictures of those every day. It seemed all the way down to the 56% then you had. And I'm just talking about the big ones too.

Macan Nia

Covid was a big one in the sense that global economies shut down. We had no idea what Covid was. Markets were down 36% in a matter of nothing, and we made it through that. And you know what? This potential and I still don't think that's going to be the case. Potential, you know, biggest people calling the biggest trade policy change in a hundred years.

Macan Nia

I don't think it's going to be to that extreme. I think there's going to be I'm in the camp and that you are too. I know you are. We're in a fair trade. Can we think that tariffs that we will be in place by the end of the year will be fair trade, not the protectionist trade policies that right now are potential to go in.

Macan Nia

So this too shall pass. The key now is creating your bucket list of what you wanted to buy. Going into the year. Realizing they're at a cheaper price today, they could go lower. But you know, you got to you got to dabble in now slowly dabble in if you get to sell offs, keep adding them and the key is coming out of it.

Macan Nia

Have you allocated all the capital you wanted to? That's the key coming out of this by going into the summertime. Had you allocated all your capital?

Kevin Headland

I think the opposite side is make sure to not make a knee jerk reaction. And get out necessarily. Again, if your financial plan is longer, don't make knee jerk reaction. Make sure you maintain the plan. Whether it's maybe it's reallocation and maybe you want to go to a fixed income, the one of the biggest issues, the toughest decision we've talked about as many times is in these periods, making the decision to go to cash, because if you go to cash, it's two decisions getting out and getting back in.

Kevin Headland

When do you get back and when is the bottom? Everyone's looking for the the next time to get back in and sometimes you wait too long. We've seen it during Covid. We've seen other periods where unfortunately, investor in cash and by being cash are not going to achieve their returns. You need to get your financial goals. So, again, it's time to review.

Kevin Headland

Time to plan. Try and look at this with a air of, pragmatism. You said realism and optimism, and I do autos again, depending on where your time frame is. But yes, look at these in different lenses and there's arrows, there's sentiment, there's emotion involved with this as well in terms of, investors. And that's always the hardest part.

Macan Nia

And I think this really highlights as well the importance of asset allocation. We never know with 100% certainty how a year is going to develop. So for this.

Kevin Headland

And that story and the importance of financial advice, this is periods where financial advisors really help clients perhaps avoid making the wrong decisions.

Macan Nia

I found that very interesting. Goes I was thinking about it yesterday, potentially those clients that were disappointed by their relative underperformance last year, by maybe not having overweight to equities or overweight to tech. They had a great return, a balanced portfolio in value specifically, but it underperformed the mega caps. Look what has happened this year that rotation. Now you have outperformed if you're a balance and that's it.

Macan Nia

Actually if you're a balanced investor 6040, your bonds have held up pretty well. So yeah, it shows you the importance of diversification, the importance. There's I think we're all trying to try to get, understand, wrap our heads around or arms around what how much truth there is to the rhetoric. And when there's an element of uncertainty.

Macan Nia

Diversification is important, especially when you're looking at it from a bond perspective, is if we do get a material slowdown, let's say, okay, my equities will grow being more downside, but my bonds should continue to rally. So it's yeah, I think the past couple days although I have been I, I love moments like this. I think it's exciting because I know there's a way out of it.

Macan Nia

Like I say, in anyone in investing, whether it's advisors, strategists, we probably make too much money during bull markets, and we don't make nearly enough money during bear markets because there's a lot of hand-holding. There's, you know, it is a lot of work. We have to get over emotional biases, but these are the opportunities that you can really add to that, to your wealth.

Kevin Headland

Yeah, I think it's a great way to end it. We didn't get nearly into, our chart book and charts. We. Oh, yeah. Just in that and enjoy. Because listen, sometimes things happen, and you got us. You got to shift. So, we'll we'll have another podcast.

Macan Nia

In the checkbook. Is it. Those are data points in previous times, right? Like you got to adapt. You got to be flexible. And, you know, we're moving into potentially a new environment. So maybe we'll do that for the next podcast.

Kevin Headland

Yeah, I think we'll do that. A quick follow of a new on our podcast. And, you know, maybe in two weeks, as you said, this narrative might be different. Who knows? But it's something to pay attention to. And we're going to you can't see on top of it. And, you know, sharing information as we can, whether it's for our podcast, our, our notes, our monthly emails, and LinkedIn as well, so please look out for that stuff.

Kevin Headland

And, you know, we're there to provide information and hopefully help you make better decisions for your clients.

Macan Nia

I think that's a good place to, to stop. And, we wish everyone luck in this type of market. Keep calm and carry on. But I'm Mark O'Neill.

Kevin Headland

And Kevin Hedlund.

Macan Nia

Thank you for listening. And we go here

Kevin Headland

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Kevin Headland

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Kevin Headland

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Kevin Headland

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Kevin Headland

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