What Stovall says
“I definitely think that if we do end up erecting those tariffs, they will be brought down fairly quickly,” Stovall said in an interview with Yahoo Finance, calling the tariffs “more rhetoric than reality.”
Stovall colorfully refers to anxious investors as “fainting goats” — at the slightest indication of market volatility or economic uncertainty, investors tend to “fall over” and retreat to safer positions.
During times of uncertainty, he explains, investors typically shift toward defensive stocks, particularly those in health care, consumer essentials, utilities and real estate.
Stovall predicts that initial fears sparked by Trump’s tariffs will likely cause declines in cyclical sectors like technology and industrial materials, both sensitive to disruptions in global supply chains. Interestingly, the financial sector — particularly insurance stocks — might remain relatively unscathed due to their limited reliance on imported materials.
As key tariff implementation dates approach — steel and aluminum tariffs took effect on March 12th, followed by reciprocal tariffs scheduled for April 2nd — investor anxiety remains high.
Stovall’s view suggests virtually no industry is completely safe from nervousness in the short term, but he cautions investors not to panic prematurely. Essentially, he argues, Trump’s tough talk is designed more for political positioning than economic permanence.
Trump, Stovall says, will continue to “call victories” and make firm declarations about his tariffs, but ultimately, Stovall predicts they’ll only be around for “a very short time.” And for investors worried about an incoming recession, he says it’s “too early” to have that conversation.
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Learn MoreInvesting during market volatility
But is it too early to talk recession, as Stovall says? Consider these definitions typically assigned to significant market drops.
- Corrections: These occur when the major indexes drop between 10% and 20% but are typically short-lived.
- Bear market: This involves sustained drops of more than 20% and can last several months to a year or longer.
- Recession: The National Bureau of Economic Research says recessions are marked by significant drops in economic activity across gross domestic product, income, employment, industrial production and sales.
Those definitions would support Stovall’s caution against hasty investor retreats. As of mid-March, the S&P 500 had dropped more than 9% from its record high on February 19 — significant, but not quite a correction. The Nasdaq Composite had already entered correction territory, having fallen more than 10% from its peak in December 2024.
A broad correction may be close, but the U.S. appears to be many steps away from even a bear market, let alone a recession.
Regardless, prospective and current investors should note the industries targeted by the recent tariffs, specifically the automotive sector, retail and manufacturing. With supply chain disruptions and steep tariffs, there have been declines in mergers and acquisitions as well as lowered valuations of international goods — none of which will appeal to anxious investors.
Trump’s tariffs may have investors feeling like avoiding the stock market altogether, but there are ways to stay invested during market volatility. Let’s explore some of those approaches.
Explore defensive stocks
Like Stovall mentioned, defensive stocks in consumer staples, health care, utilities and insurance tend to remain stable during times of economic confusion. Defensive industries provide essential goods and services, and even better, they usually don’t rely heavily on overseas materials.
Some examples include Procter & Gamble, Johnson & Johnson and Berkshire Hathaway. These stocks historically offer steady returns and are less likely to fluctuate dramatically when the market grows anxious.
Shift investments to value funds
Rather than growth-oriented funds, value funds focus on undervalued stocks, which are companies that are traded on a value that appears below their actual worth. While growth is slower, returns tend to be more stabilized in a volatile market.
Tax experts and investment strategists may recommend value-based exchange traded funds (ETFs) during tariff phases. Investors have reportedly sunk nearly $2 billion into these funds through mid-March, reflecting investors’ attraction to industries like banks, insurance and utilities — some of the same fundamental defensive stocks suggested by Stovall.
While Trump’s tariffs have certainly rattled markets and investor nerves, Stovall’s advice underscores a key point: the tariffs may be temporary, and panic might be premature.
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