MW Investors are anxious about Trump's tariffs. Here's what financial advisers are telling them to do.

By Gordon Gottsegen

Uncertainty surrounding tariff policy has rattled markets, and volatility is the highest it's been all year

Investors just made it through a wild week for the stock market.

The Dow Jones Industrial Average DJIA ended the week 2.4% lower, while the S&P 500 SPX was down 3.1% and Nasdaq Composite COMP lost 3.5%. In the past week, the Nasdaq entered and exited correction territory, falling over 10% from its Dec. 16 high. Meanwhile, the S&P 500 briefly dipped below its 200-day moving average, seen as a key "line in the sand" for its future propsects.

Investors are probably trying to process what happened, and right now most of their questions likely revolve around one thing: tariffs.

"For many of the clients we talked to, their main concern right now is tariffs and what effect our tariff policy is going to have on national markets and internationally," Shawn Klotsche, a financial advisor associate and financial-planning analyst for the Wealth Alliance, told MarketWatch. "What that tariff policy is going to look like a week, two weeks or a month from now is anybody's guess at this point."

Tariffs are making investors anxious for a few reasons. First, they can increase costs for companies that rely on importing foreign goods, and that can impact profits and, in turn, share prices.

Second, those price increases can be passed down to the consumer, putting more financial stress on consumers and perhaps influencing them to buy less. The combination of these effects on consumers and businesses has some economists worried about tariffs causing a recession.

And lastly, these price increases would come at a time when the economy is still grappling with residual inflation, and additional price shocks may make it harder for the Federal Reserve to justify immediate action with further interest-rate cuts.

Also read: Will Trump's tariffs push the U.S. economy into recession? Many economists think so.

To make things more difficult for investors, it's been pretty unclear what President Donald Trump's tariff policy will actually be. Trump first unveiled his 25% tariffs on Canada and Mexico, and an additional 10% tariff on China, in the beginning of February. Yet days later, he delayed the tariffs against Canada and Mexico by a month, giving the countries time to negotiate. One month passed and Trump said there was "no room left" for negotiation and the delayed tariffs went into effect, along with additional tariffs on China. But again, days later, Trump announced he would delay some of the tariffs on Canada and Mexico for goods that fall under the USMCA trade agreement.

The tariff whirlwind may be enough to make investors' heads spin. So if you're an investor trying to make sense of what's going on, at least you're not alone.

"No one has the answers right now for tariffs. I'm not even sure the Trump administration has the answer either," Klotsche told MarketWatch.

While there may be some solace in that, markets don't love uncertainty.

"This is a roller-coaster market with a wall of worry that's under construction," Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told MarketWatch.

"In aggregate, the number of factors that have potential to impact investor sentiment have risen - fueling the uncertainty while setting the stage for increased volatility," Sandven said. "And our view is what has happened this week - and probably what will continue into next week - is a lot of uncertainty beyond the company fundamentals."

This uncertainty led to elevated levels of stock-market volatility. The S&P 500 clocked in six consecutive days of gains or losses of more than 1% between last week and the week prior. Last week also saw some pretty significant intraday moves for the index.

Meanwhile, the CBOE Volatility Index VIX reached new highs for the year, peaking at an intraday level of 26.56 on Friday.

"The VIX is talking," Klotsche said.

Looking past tariffs

The extent to which tariffs will be enacted is still unknown, as is their eventual effects on the economy. But investors have more tangible economic data to parse in the meantime.

Friday's job report showed that the U.S. added 151,000 jobs in February, which was slightly below the 170,000 jobs forecast by Wall Street economists. On top of that, the unemployment rate ticked up from 4% in January to 4.1% in February.

While the latest jobs report showed the labor market cooling slightly, there wasn't too much to instill panic.

"We were expecting the unemployment rate to tick up this year," Gina Bolvin, president of Bolvin Wealth Management Group, wrote in an email. "The markets should breathe a sigh of relief that there wasn't a shock in either direction and the report was a mixed bag. The takeaway is that wage data declined, which is disinflationary."

Just a few hours after the jobs report, Fed Chair Jerome Powell gave a speech on the state of the economy at the University of Chicago's 2025 U.S. Monetary Policy Forum. Powell called out the fact that wages are no longer a source of inflationary pressure, and despite the slightly soft jobs report, he thought the labor market was still solid.

"Powell spoke with tempered optimism following today's gentle miss on jobs data. Anyone looking for outright growth concerns from the Fed was left empty-handed," Thomas Urano, co-chief investment officer and managing partner at Sage Advisory, told MarketWatch in an email. "Powell described the economy as being 'in a good place' but recognized challenges surrounding policy uncertainty from the new administration."

While Powell brought up tariff policy, it was to acknowledge that the impacts of tariffs remain to be seen. He stressed that it is important for investors to "separating the signal from the noise."

Urano pointed out that Powell's speech indicated the Fed will approach changes in monetary policy with a sense of gradualism, and that the economy is in good enough shape that the Fed doesn't have to rush its easing cycle.

Powell's tone may have helped dispel some investor fears, with stock-market indexes bouncing back from session lows after the Friday speech.

What should investors do?

With so much about tariffs still unknown, investors may be better off ignoring them for now and not changing their investing strategies too drastically.

"If anything, if people liked the S&P 500 at 6,000, they should really love it now," Michael Rechenthin, head of research and development at Tastylive, told MarketWatch. "What we were looking at just a month ago, two months ago, three months ago, six months ago, it's still the same economy."

Rechenthin acknowledged the stock market's drop over the past few weeks, but also said that this could be an opportunity for investors to diversify in what he calls the "boring stuff" - like stocks in the consumer-staples sector XX:SP500.30, metals like gold (GC00) and silver (SI00), and so on.

"I think boring is better than exciting when the market declines," he said.

Financial advisor Klotsche also said that the stock-market action this week is a reminder of why investors may want to stick to a diversified portfolio and a longer time horizon.

"It's a good time to remind investors to stay diversified because no one has the crystal ball. This tariff issue could go away," Klotsche said. "Stay diversified, be exposed to all the asset classes, because we don't know where the market's going and we want to be exposed to everything."

What markets are focusing on can change with any given news cycle. Investors will get new inflation data this coming week, with the Bureau of Labor Statistics reporting the consumer-price index on Wednesday and the producer-price index on Thursday. Depending on the data, that could bring inflation back into the spotlight, or it could help ease some investor fears. The upcoming inflation data and the recent jobs report also leads into the Fed's next FOMC meeting on March 19.

The major U.S. stock-market indexes ended Friday higher after a particularly choppy week. The Dow was up 0.5% on the day, while the S&P 500 gained around 0.6% and Nasdaq climbed 0.7%. Despite the relief on Friday, both the S&P 500 and the Nasdaq booked three consecutive weeks of declines, and their largest three-week losses since September 2022.

-Gordon Gottsegen

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March 09, 2025 12:00 ET (16:00 GMT)

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