How smart investors should respond to new tariffs

'Mind your risk.'

Transcript

00:00I think everybody should be focusing on what's going on in Washington because they have an

00:04impact on the markets, probably more so than most of us want to admit. But in reality,

00:12we can't predict politicians anymore than we can predict markets. So it's something that we're

00:15going to have to take day by day. And I think in this type of environment, the goal is to

00:21not lose your shirt. So I don't think this is the time to be swinging for the fence in any asset

00:24class or any investment strategy. I think the idea is to rein it in, mind our risk,

00:30and then proceed accordingly. We don't know what we don't know. So we have to assume that

00:36whatever market we're trading or what we're getting involved in, we have to assume that

00:40the worst is going to happen. So we prepare for the worst and hope for the best. And I think

00:43that's the only advice I can give. We've never really been in this situation before. Obviously,

00:50this is Trump 2.0. In the first administration, there were some curveballs and some tariffs. We

00:54learned some lessons. But the reality is this is a much bigger and bolder agenda. And so,

01:02again, we just have to take it day by day and make sure that we're paying attention to risk,

01:06not reward. The original thought was when Trump was elected in November, a lot of the markets

01:11reacted. We called it the Trump trade. We saw interest rates go up as treasuries went down.

01:17We saw a lot of commodities such as crude oil, natural gas, live cattle, even, and even some of

01:24the grains rallied because the idea was these tariffs were going to cause inflation. But

01:28as we're getting closer to the final innings of the tariff discussion, I think that a lot of

01:33markets have kind of come to the conclusion that maybe the tariffs might be deflationary,

01:38not because of what individual tariffs do to particular products, but because of the

01:44impact as a whole. I mean, it takes a lot of exuberance out of the speculative side of some

01:50of the risk assets, for example, stocks. A lot of our economy is built on the wealth effect. A lot

01:56of it is kind of an animal spirit, so to speak. So when you see assets like stocks selling off

02:02pretty sharply, it makes people feel less poor, whether they really are or not is a whole different

02:07question. But if you feel less poor, you spend less money, and it rolls its way through the

02:11economy and slows things down a little bit.