4 Ways to Respond to Tariffs & Stock Market Volatility

So far in 2025, headlines haven’t been kind to investors, with tariffs, geopolitical tensions, and stock market messiness raising questions, mainly: “What should I do to protect my investments?”  

Investing is like driving a car. There may be noise coming from somewhere in the mechanics, but before assuming the vehicle is totaled, driving is unsafe, and we should walk for the rest of our lives, we can lift the hood to see what’s going on.    

Here are four ways investors can “check under the hood” and respond to tariffs and stock market volatility.  

Here’s another driving metaphor: If your mechanic says he plans to increase prices but hasn’t sorted out the details yet, do you: 

1. Sell your car 
2. Start reading every book at the library about DIY car repair 
3. Fire your mechanic immediately 
4. Keep doing what you’re doing and watch for price changes 

Of course, any levelheaded person picks option 4. Sure, you may eventually decide to DIY simple maintenance, look for another mechanic, or adjust your budget, but until you know how things shake out, you’ll wait and watch what happens.  

It’s the same with tariffs — companies and consumers are sitting tight to see how things unfold. Despite knee-jerk sentiment to act now in anticipation, at Credent, we’re avoiding major portfolio shifts until we have a better picture.  

Taking a beat is wise because the markets rarely react as the masses expect. Case in point: Conventional wisdom in mid-December 2024 encouraged a focus on large-cap, domestic, growth equities. However, the opposite transpired, with developed international markets succeeding. (Broadly, stocks in Europe are outpacing the S&P 500 by the widest margin in 40 years.) 

We’ve been able to participate in those returns because we didn’t overreact to what everyone said about domestic equities back in December, and we’re taking the same approach with tariffs. 

Even as we take a beat on tariffs, how do we navigate the rhetoric around recessions, volatility, and geopolitics? Should we prepare for the economy to break down?  

An optimistic indicator is Q4 earnings data. In Q4 2024, earnings growth was double expectations. Specifically, companies that receive consumer discretionary spending (spending on non-essentials, like luxury brands) led this growth. Why does this matter?  

This data points to a strong consumer who is employed and spending money, and a strong consumer bodes well for future earnings and stock market performance.  

We rarely foresee a dismal economy after the kind of earnings season we had in Q4. Yes, volatility is likely, but we don’t anticipate it will be severe enough to cause concern for equity market participation.  

Amid talks of tariffs and stock market volatility, be aware of bias. For example, the media talks frequently about the S&P 500, but this is a biased index. How?  

The S&P 500 owns 500 stocks, but 10 of those stocks contribute to over 30% of index market capitalization. If one of those 10 companies has a correction, it can drag the rest of the index into a correction, giving the impression that stocks overall are worse off than they may be.  

Year-to-date (through mid-March 2025), the average stock’s return is mostly flat, whereas the return of the S&P 500 is nearing the -5% mark. The discrepancy reveals the bias — the S&P 500 does not always speak for the health of all stocks.  

Volatility is a part of the terrain of investing and is not a reason to leave the market. 

Still, when stocks go on sale amidst volatility, people’s gut reaction is to step away and sell. At Credent, if and when stocks go on sale, we are net buyers and look for opportunities in the chaos of the equity market. We always watch the markets at a granular level, assess new data, and prepare to act as necessary on your behalf.  

Additionally, your financial plan rides shotgun and drives our investment decisions for you, so when the noise is loud, pull over and refer to this roadmap to remind you of your long-term destination.

To breathe easier during talks of tariffs and stock market volatility, reach out to our team using the form below.