April 23, 2025

Dear Friends:

Tariffs, Doc Holiday, and Three Key Questions (and Answers)

Even if you limit your “news” intake these days, you have probably heard quite a bit of talk about tariffs and what they mean for the future of the US and Global Economy.  The struggle in predicting the outcomes is because we haven’t really scen a lot of tariff trade wars in recent times.  It calls to mind one of the all time great movies, “Wyatt Earp” where the legendary Doc Holliday (played by the recently passed and amazing Val Kilmer”) tells his friend Wyatt that “there is no NORMAL life Wyatt, there is just life”.  Similarly, there are no “normal markets” just markets.

So no one knows for sure but there are a couple of potential outcomes and three questions we have to ask ourselves:  1) Is Trump a madman and will these tariffs be a disaster?   If the answer is yes then it is highly likely he and anyone who agrees with his policies will be out of power with the next election. The new regime would likely reverse course and reinstate the old ways and the markets would eventually adjust back.  Or, 2) Trump looks like a madman at first but his policies actually start to work and create a more balanced economy and stronger growth which paves the way for lower personal and corporate tax rates due to lower deficits and borrowing costs.  If that happens the markets will respond accordingly and will likely be recovered and even possibly well above previous highs.

The third question is that as we recall previous crisis time period (think Covid-19 pandemic, the Great Recession, the Dot Com Bust) – what do we wish we had done if we could go back in time?  The answer in most cases is to not sell assets during the panic, and also to look for opportunities to pick up assets that are now relatively cheap by either deploying cash or rebalancing against assets that have appreciated (like short-term bonds).  Any of those harrowing time periods represented an amazing opportunity with the average recovery in the S&P 500 we see just 12 months after those events is up +28.1%.  Although there are no guarantees, this time could be similar when looking at a greater than 1 year time horizon.

Either way, it is important to take the long view that markets have adjusted to wars, depressions, recessions, pandemics, and more and will adjust again.  As the worlds oldest celebrity investor Warren Buffett says, “buy when there is blood in the streets and everyone else is selling”.  Or in modern vernacular “buy (or at least don’t sell) when there is blood in the tweets!”.   This is where diversification and having different assets classes allow us to leverage short term bonds and other fixed and alternative holdings to rebalance into stocks when they are down and do the opposite when stocks are high.  This forces the “buy low sell high” discipline and keeps portfolios moving, as well as not selling out and being out of the market when it recovers. As history has shown, they will either recover or the world as we know it has ended and in that case it doesn’t matter!  We don’t believe the world is ending, but it is updating and we will see the market recover as the international business world adjusts to the new rules.

Tax Deadlines

April 15^th is fast approaching and filing an extension on your taxes is often a better option in lieu or rushing to getting your return done and missing opportunities, particularly if you are eligible for additional 401K or IRA contributions.   Please reach out if you have questions about tax statements or anything you need.  We are extremely grateful for each of you and thank you for your partnership!

Regards,

Mitch Anderson                                              Destin Tompkins