It was written on the wind.
Just over a month into President Donald Trump’s presidency, his geopolitical gambits have unleashed a wave of commentary about the known unknowns, particularly the effects of his trade war on inflation, which is still a concern at the Federal Reserve, and on economic relations between the U.S. and, not to sound overly dramatic, the rest of the world. The outcome is uncertain, but when it comes to your finances uncertainty is also a call to action.
Trump has threatened to impose tariffs of 25% or more on imports of cars, semiconductors and pharmaceutical products. He raised tariffs on imports from China by 10%, and promised an additional 10%, while 25% tariffs on imports from Canada and Mexico are set to take effect next week. The Economist declared: “Tariff uncertainty can be as ruinous as tariffs themselves.”
Executives, investors, economists and stock-market analysts have all expressed concerns over the uncertainty being wrought by these tariff proposals, not to mention by Trump’s desire to turn Gaza into the “Riviera” of the Middle East and his calling Ukrainian President Volodymyr Zelensky a “dictator” who caused the war in Ukraine — even though it was Russia that invaded that country on Feb. 24, 2022.
Regardless of whether you are a Democrat, a Republican or an independent, the uncertainty around these actions is actually a good thing for one simple but often overlooked reason: Trump made his intentions clear. The American people, whether they voted for him or not, had every opportunity to make themselves aware of these policies prior to the November election. Uncertainty should, if we’re smart, enhance our financial-planning skills.
Diversify your portfolio if you are racked with uncertainty, invest in defense and consumer-staples stocks, have an emergency fund and pay off your debts.
That is, there’s a big gap between whether you agree with the policies or not and how you react to them. The former will, of course, affect the latter. If you’re working in financial services and believe looser regulation is a positive step, you may feel more certain about your future than a federal worker who is concerned about their job. Market volatility, meanwhile, has increased in recent months, reflecting investors’ real-world concerns.
“Financial markets have whipsawed amid tariff negotiations,” Goldman Sachs Research said in a recent note. “If the U.S. implements sustained taxes on exports similar to those that have recently been proposed, it would likely cut S&P 500 SPX Index earnings per share by 2%-3%. For the stock market, every 5 percentage-point increase in the U.S. tariff rate is estimated to reduce S&P 500 earnings per share by roughly 1%-2%.”
And, yes, the uncertainty itself has a negative impact on investor sentiment. “It could reduce the forward 12-month price-to-earnings multiple — a key measurement for a stock’s market value — by around 3%,” Goldman Sachs adds. David Kostin, the firm’s chief U.S. equity strategist, said some investors are worried that a trade war could lead to higher interest rates. Higher bond yields make stocks look less attractive, he added, and could further weigh on equity valuations.
But while the wisdom of Trump’s policies are open for debate elsewhere — and are typically divided along highly partisan lines — economists’ questions and/or caution in response to the administration’s policies is preferable to the hubris that preceded economic disasters and stock-market crashes like those of Oct. 28, 1929; Oct. 19, 1987; and Sept. 15, 2008. Investors don’t like uncertainty, but it is a natural and, above all, useful emotional and practical response.
Related: As Trump ratchets up China tariffs again, why consumers will feel the pain this time
How to protect yourself
Speculative bubbles — one of the most frustrating and reliable precursors to a stock-market crash — are far worse than the uncertainty some industry leaders and investors are worried about and planning for in 2025. Whether it’s a stock-market, real-estate or credit bubble, that level of euphoria and forgetfulness is an anathema to the concepts of doubt and uncertainty.
Even the stock-market correction on March 12, 2020, in which markets declined by 26% over four trading days, was related to concerns triggered by COVID-19, an event that had been widely flagged. The “19” in COVID-19 stands for 2019, and many media outlets, including this one, had been warning readers for weeks and even months about the spread of the coronavirus.
As I told one reader who was worried last autumn about the prospect of World War III, it’s OK to be unsure about the future. It’s good to care. It’s natural to worry about events and to process your anxiety. It’s better than ignoring them or believing that the good times — whether that’s near full employment or low interest rates and robust economic growth — will last forever. And, if you can, it’s smart to adapt.
What’s the answer to this uncertainty? If you fear runaway inflation or global political instability, whether you’re fearing the machinations of an Obama, Trump, Biden or Trump 2.0 administration, protect yourself. Diversify your portfolio, perhaps invest in defense and consumer-staples stocks, maintain a healthy emergency fund and pay off as many high-interest debts as you can.
Economists’ questions and/or caution in response to the administration’s policies is preferable to the hubris that preceded other economic disasters.
J.P. Morgan Wealth Management took a similar approach, first acknowledging a change in its risk assessment of Trump’s proposals. “These tariffs create significant uncertainty in our economic and market outlook. Initially, our strategists believed significant tariffs on Canada and Mexico were unlikely due to their potential negative impact on North American growth.”
But the bank gave its clients advice, something precious few people take time to heed in the midst of speculative bubbles, when they believe that what goes up will never come down. The strategists lowered expectations for U.S. economic growth and warned of elevated stock-market volatility ahead, “given that U.S. large-cap equities are trading at premium valuations.”
And J.P. Morgan’s zinger is boring, but true: “In times like this, it’s important to remain focused on ensuring your portfolio withstands uncertainties without derailing your near-term needs and long-term goals. A resilient portfolio is properly diversified and tailored to your long-term plan.” In other words, don’t panic. Make your uncertainty a permanent part of your planning.
Crucially, doing this does not discount the risks. It simply allows us to adjust to real-world events and focus on the big picture. That’s harder for some people than others: Small-business owners, who are already struggling with tight margins and rising costs of labor and raw materials, will — if the tariffs are imposed — be hit hard by a 25% increase in the price of certain products.
Don’t allow this wave of uncertainty to spook you. It comes with a lot of noise. Spread your long-term investments across different industries and regions of the world.
And the rest of us? Processing our uncertainty — or rather, being comfortable with that emotional and psychological state — can help us sharpen our problem-solving capabilities, allow us to evolve and mature to the point where we don’t allow periods of unexpected shock, when they do come, to completely throw us off course and push us to buy or sell in haste when we should probably just breathe instead.
Giving ourselves permission to explore uncharted territory can teach us to have compassion for others and especially ourselves, to accept and face change as a friend rather than an enemy, to improve our mental health and even — perish the thought in 2025 — to ask more questions of those we don’t necessarily agree with. Uncertainty serves a critical function: It helps us to stay alert and keep our wits about us.
In her 2023 book, “Uncertain: The Wisdom and Wonder of Being Unsure,” Maggie Jackson writes: “Far from automatically miring us in cognitive paralysis, uncertainty plays an essential role in higher-order thinking, propelling people in challenging times toward good judgment, flexibility, mutual understanding, and heights of creativity.” (Ask your local Federal Reserve official for more on their process.)
“It is the portal to finding your enemy’s humanity, the overlooked linchpin of superior teamwork, and the mindset most needed in times of flux,” she continues. “Rather than being a sign of deficiency or weakness, wielding the cognitive tool of not-knowing is a mark of the persuasive arguer, the most capable student, the resilient physician and patient, and, by multiple measures, the nimble executive.”
Video: How Trump tariffs are moving markets, and what investors should know
Spread your risk
So how can this help people make better investment decisions in 2025? It reminds us that all that certainty you may have felt during the previous administration (if you’re a Democrat), or during the current one (if you’re a Republican and a Trump supporter), is an illusion. There is no true certainty. Yes, economic risks rise and fall, and our tolerance wavers, but everything is always changing.
What we can do is write a report, take a poll, analyze stock-market trends and assess how uncertain economists, business leaders and investors are feeling because, yes, that will influence their behavior and yours. It may ultimately impact your job, your portfolio and even, perhaps, the price of eggs. But rising uncertainty should not be viewed as something to fear or as just plain bad. It is simply ever-present.
As Rana Foroohar wrote in the Financial Times last week, the current uncertainty surrounding tariffs is not necessarily on point: “Trump’s revolving door of tariff threats is roiling U.S. markets and aggravating allies and adversaries alike. But it is worth remembering that many of the shifts in global trade and supply chains happening today have been under way for some time.”
Such trade alliances are constantly changing, and those supply chains are increasingly complicated. “The U.S. shifted supply to Mexico, yes, but also to Vietnam,” she wrote. “Europe has moved away from Russian energy and towards the U.S. — at least for now. And middle powers like Brazil, India and members of the Association of Southeast Asian Nations (Asean) are finding new trade alliances around the world.”
The latest confidence readings of business leaders are not consistent. It may explain why the stock market has been anything but predictable since Trump was elected.
Kevin Khang, senior international economist at Vanguard, said tariff proposals during Trump’s first term may provide insight into what will happen next. “Initial proposals in late 2017 and early 2018 were broad in scope and aimed at many trading partners,” he said. “Over the next year and a half, we witnessed many changes as the policy took shape. Ultimately, those tariffs targeted primarily steel and aluminum, which was a more measured outcome than initial proposals suggested.”
He’s singing from the same playbook as J.P Morgan’s strategists. Don’t allow this wave of uncertainty to spook you. “To help navigate choppy markets, we believe it’s important to tune out the noise, keep perspective and remain focused on your long-term goals,” he said. “Investing in the right mix of shares and bonds for you, and spreading your investments across different industries and regions of the world, can protect your portfolio from market downturns.”
And how are captains of industry feeling? According to the Conference Board’s Measure of CEO Confidence, their mood actually improved by 9 points in the first quarter of 2025, rising to a reading of 60, the highest in three years. Meanwhile, the S&P Global U.S. Services survey of top executives who buy supplies for service-oriented companies fell to a 25-month low of 49.7 in February.
Their confidence, or lack thereof, in the current economic climate is not consistent. It may go some way to explain why the stock market has been anything but predictable since Trump was elected, and why economists — and the Fed — have expressed their own lack of clarity on the months and years ahead. Rather than be closer to 50 or 60, as they are currently, I’d be more concerned if those confidence readings were as low as 10.
But if they were at or above 90? I’d be petrified.
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