May 2025
What’s Next in the World of Tariffs?
Understanding Outcomes
In just a few short months, the tariff story has taken twists and turns of Dickensian proportions, and investors in the stock and bond markets have been on edge, awaiting the next revelation. The rapid pace of new policy, reversals, exceptions and retaliation has created short-term volatility, but what types of long-term outcomes could we see?
The Current Landscape
President Trump’s administration has implemented wide-ranging levies across countries and sectors, from the 10% baseline tariff affecting most nations to 25% on steel and aluminum and rates as high as 145% on Chinese imports. Recent agreements demonstrate the fluid nature of these policies: The U.S. and China suspended most Liberation Day tariffs for 90 days, reducing U.S. tariffs on Chinese imports to 30%, while the U.K. secured exemptions for steel and aluminum alongside reduced automotive tariffs of 10% (down from 25%) for up to 100,000 vehicles.
These developments suggest that while the initial announcements created market disruption, negotiations are active and outcomes are far from predetermined.
Best-Case Scenario: Negotiations Advance U.S. Interests
In the most favorable outcome, Trump’s tariffs prove to be effective negotiating tools rather than permanent policy fixtures, with the administration securing bilateral agreements that preserve international commerce while winning concessions that address trade imbalances.
Companies facing supply chain disruptions would see costs normalize as exemptions expand. Technology firms might particularly benefit from stronger intellectual property protections, while domestic manufacturers could retain competitive advantages. Equity markets would stabilize, and inflation would remain manageable through widespread exemptions.
Oxford Economics suggests this scenario could boost global GDP growth by 0.1% in 2025 and 0.3% in 2026.
Worst-Case Scenario: The Trade War Escalates
A breakdown in negotiations could lead to reciprocal tariff escalation and supply chain disruption, with average effective U.S. tariff rates potentially reaching 35% if the 90-day suspension periods expire without resolution. This would represent the highest level of average tariff rates in 125 years.
Manufacturing firms dependent on cross-border components—particularly automotive and technology sectors—would face sustained margin pressure. Car parts typically cross U.S., Mexican and Canadian borders multiple times before final assembly, making these industries especially vulnerable. Companies like Adidas and Mattel have already announced they will pass higher costs to consumers, while other retailers have begun showing tariff surcharges on purchases of imported goods. Some behavioral shifts are already evident as well. For example, travel from Canada has declined 75%.
Oxford Economics projects U.S. GDP could fall as much as 6% below its current trajectory (and into recession) by the end of 2026 under severe escalation—three times the global impact. Business investment could contract quickly, while unemployment might rise from 4.2% to 5% by 2027. This stagflationary environment would make it difficult for the Federal Reserve to promote stability through rate cuts.
Middle Ground: Managed Disruption
The most probable outcome likely falls between these extremes, involving some sustained trade friction with selective agreement-making. Regional trading blocs may strengthen as countries seek alternative arrangements, while bilateral negotiations continue on a case-by-case basis.
This scenario would create winners and losers across sectors and geographies, with companies adapting their operations and supply chains and potentially gaining market share from less flexible competitors
Investment Implications
The wide range of potential outcomes reinforces the importance of diversifying portfolios so that they have the potential to benefit from various scenarios. We believe the following strategies make sense in the current environment.
Sector diversification: Maintaining exposure across both domestically focused and internationally oriented companies can help provide balance. Some sectors may benefit from reshoring trends, while others may thrive as trade agreements emerge.
Geographic balance: While U.S. equities may benefit from domestic policies, foreign diversification remains valuable as companies in other regions of the world adapt and potentially create new opportunities.
Quality focus: Companies with strong balance sheets, flexible operations and adaptive management teams are better positioned to navigate policy uncertainty regardless of outcomes.
Patience with volatility: Trader reactions to policy announcements have been swift and sometimes severe, but historical precedent suggests that the U.S. stock market prices in risks and rises over longer-term periods.
Preparing for the Unknowable
While tariff policy introduces near-term uncertainty, the evolving nature of agreements with China and the U.K. plus the ongoing negotiations with other partners suggests that it will be some time before we have clarity. Until then, we want to make sure you are progressing toward your investment goals. Instead of attempting to predict specific policy directions (which has proved very difficult with this administration), maintaining a disciplined, diversified investment approach allows portfolios to potentially benefit from positive developments while seeking to mitigate risks during challenging periods.
We believe the current environment will reward patience and strategic positioning over reactive decision-making. This has played out over the last month, with the S&P 500 gaining nearly 19% (before reinvested dividends) since its early-April low, for example.
That said, if the unpredictability of the market is causing you to lose sleep, speak to your advisor. With the recent gains, we’ve been afforded the flexibility to take some risk off the table as appropriate.
Our Latest Videos
In his monthly update, Chief Investment Officer Joseph Powers discusses Moody’s credit downgrade of the U.S. and the opportunities foreign stocks represent today. Click here to watch now!
Portfolio Manager and Director Jennifer Loveless covers three strategies to simplify your financial life.
Andrew Busa, director of financial planning, considers four methods to manage the risk of portfolio concentration.
Director of Portfolio Management Charlie Toole reviews dividend-growth investing and how he manages the RWA Dividend Growth strategy.
Retirement: The Halftime That Opens a Whole New Game
Financial Planning
Retirement is the reward for years of discipline and hard work. But what if instead of a finish line, retirement is just halftime? What if the best is yet to come? After all, retirees are living longer, healthier lives well after their working days have come and gone.
That’s why we believe retirement is about more than financial security. It’s also about embracing the purpose of your wealth. You’re not closing the book on your working years; you’re opening a new door to a field of possibilities, with more time, freedom and resources than ever before.
The Halftime Pause: Reflecting on What Comes Next
In the first half of life, you’re often guided by what you’re supposed to do, like get an education, build a career, raise a family and save your money. When you reach retirement, you might feel a sense of accomplishment but also a sense of uncertainty. What now? The truth is that this stage of your life is a chance to reflect, reset and then pursue what you love.
It all can feel exhilarating and daunting. The structure that once guided your days with meetings at work, deadlines and the camaraderie of colleagues suddenly disappears. Your children are adults and independent. Financial worries may ease, but new questions arise. Who are you without your work? How will you spend your days? What gives your life meaning now?
The Hidden Challenges of Retirement
While many retirees look forward to newfound freedom, the reality can be more complex and nuanced. Here are a couple of real-life challenges we sometimes hear from clients:
- Loss of identity and purpose: For years, your career may have provided not only a paycheck but a sense of identity and accomplishment. Letting go of that can feel like losing a part of yourself. Some people grapple with the question “What do I have to offer now?”
- Shrinking social circles: Work is a social hub. When you retire, the daily interactions vanish overnight. Making new friends as an adult can be surprisingly difficult, and loneliness can creep in, especially if you move or your partner is still working.
Other challenges can include the loss of routine and even relationship adjustments at home as you and your spouse spend more time together than ever before. These emotional and psychological hurdles are as real as any financial concern.
The Field of Possibilities
Here’s the good news. Advances in medicine and health care are helping us to live longer, healthier lives than any previous generation. This means your retirement could last 20, 30 or even 40 years. That’s a whole new act in your life’s story. This is your chance to discover new passions, deepen relationships, give back to your community, travel, learn and grow.
Recent research shows that retirees who find purpose through volunteering, mentoring, part-time work or even creative pursuits report higher levels of happiness and health. The key is to be intentional. You need to structure your days, seek out meaningful connections and embrace new experiences.
Seek Your Advisor’s Help To Navigate the Second Half
Yes, we’re here to help you manage your investments, optimize taxes and ensure your financial security. But our commitment to you goes far beyond the numbers. Turn to us for any of the following:
- Personalized guidance: We take the time to understand your dreams, fears and values, not just your balance sheet. We help you clarify what matters most to you in this next chapter and design a financial plan that supports your evolving goals.
- Emotional support: Retirement is a major life transition. We’re here to listen, ask the right questions and help you process the emotional side of this change.
- Designing structure and purpose: We can connect you with resources, groups and opportunities to stay engaged. That could be through volunteering, joining clubs or pursuing lifelong learning.
- Comprehensive planning: Our approach integrates the financial, emotional and social aspects of your life. We’re here for more than your portfolio. We’re here for you, every step of the way.
The Next Step: Your Halftime Huddle
If you’re approaching or already in retirement, take a moment to pause, reflect and ask yourself a couple of questions. What do you want your second half to look like? What legacy do you want to leave? What new adventures await?
Let’s have that conversation about your goals, your hopes and even your worries. Your advisor can design a plan that supports not only your financial security but your happiness, your health and your sense of purpose.
Because at the end of the day, that’s what the human side of wealth is all about: helping you make the most of every moment, in every season of life.
4 Strategies To Break Your Concentration
Managing Portfolio Risk
Concentration is usually a good thing. Whether you’re buckling down on a project at work or learning a new skill, focus pays off. But in a stock portfolio, too much concentration can be risky. If a single holding accounts for 10% or more of your overall wealth, it might be time to break that concentration.
Think about it—when a stock is on a run of outperformance and you hold a big position, your portfolio benefits proportionately. But when markets turn or the company behind the stock has a poor quarter or encounters an obstacle that shakes investor confidence, you could experience outsized losses in your portfolio.
And if you also work for the company you’re invested in? Your financial future is doubly tied to that organization. Should something happen to that company or your job, both your income and assets could be impacted. That’s why mitigating concentration risk is so important.
As we’ve seen this year, volatility and uncertainty have ramped up, sending the U.S. stock market to the brink of bear market territory before it rallied in recent weeks. On the heels of that bounce, now is the perfect time to assess concentrated positions on your balance sheet from a position of strength.
Here’s an overview of four strategies we use to assist our clients with their concentrated positions. Your advisor can fill you in on how we can help with any of them, as well as other options to consider.
- Giving. Giving is always a meaningful choice—whether you’re supporting a cause close to your heart or helping family. Your unique tax circumstances will shape the best approach, and we’re here to help analyze your options. We assist clients in setting up donor-advised funds, exploring charitable contributions and planning family gifting strategies. Thoughtful giving not only reduces concentrated holdings but also strengthens the legacy of generosity. (Read Giving With Warm Hands for more.)
- Options overlay. We use options overlay strategies to balance risk and reduce your tax burden while maintaining exposure to your holdings. Protective puts guard against extreme losses, covered calls generate income to offset taxes, and collars manage volatility while limiting downside.
- Diversification strategies. Direct indexing and exchange funds (not to be mistaken for exchange-traded funds) help manage concentrated stock positions while minimizing tax consequences. These tools allow investors to spread risk and avoid liquidating core holdings at once—something that could trigger a taxable event.
You may also consider selectively trimming a portion of the position. This can be a smart way to balance risk and optimize long-term returns, particularly for those in the 15% capital gains bracket (income up to $500,000).
- Succession planning. Grantor retained annuity trusts, or GRATS, are a more sophisticated solution that can work well for certain investors. These trusts fell out of favor as interest rates climbed, but when interest rates drop again, they may be worth another look, as lower interest rates boost their effectiveness. They can minimize estate taxes when transferring wealth to family members. By placing assets into a GRAT, the grantor freezes their value, removing future appreciation from their estate and passing it to heirs tax-efficiently. Concentrated positions make strong candidates for seeding a GRAT.
Managing concentration risk isn’t about moving away from success; it’s about securing it. If you want to explore any of these strategies as they relate to larger positions in your portfolio, or if you think they could help with your long-term goals, speak with your advisor.
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