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Is anyone feeling liberated from last week’s tariff announcements? Neither are we. Most investors have felt the full emotional spectrum: from anger to anguish to outright puzzlement. But the reality is setting in. Trump has taken a wrecking ball to longstanding alliances and the U.S.-led post-war world order. The world now faces a prolonged and strategic restructuring.
How should investors respond? With a quarter century observing markets, this CIO has learned a fundamental truth: While every market decline is different, they all follow the same pattern. Emotions take over, fear drives the narrative, and markets fixate on worst-case scenarios.
But fear is rarely the best advisor. Here are our key insights on navigating the current tariff turmoil:
This latest disruption hasn’t caught us entirely off guard. Since Trump’s election, we’ve consistently communicated a clear message – through podcasts, videos, and research publications: America stands to lose the most in a global trade war (see examples here, here and here). The outsized performance of U.S. equities over the past decade was built on the perception that America was a stable, rules-based environment for business. But recent policy chaos has shattered that assumption. Increasingly, global investors are viewing American assets not as a source of return – but as a source of risk.
Entering the year, Wall Street largely ignored this risk, betting that tax cuts and deregulation would outweigh any protectionist lurch. That was a precarious stance – especially with U.S. equities making up nearly two thirds of the world’s investable market. Such concentration introduced serious vulnerability.
Our investment team has already taken decisive steps: reducing exposure to U.S. equities, particularly among the richly-valued “Magnificent 7,” and extending duration in U.S. bond holdings to hedge against a slowing domestic economy. Looking ahead, expect further shifts in market dynamics. The past decade’s correlations are breaking down. Leadership is changing. Last week, the U.S. dollar – typically a safe-haven during market stress – declined against a basket of global currencies. That’s not a fluke. It’s a signal.
Markets despise uncertainty. Yet they crave confident forecasts – however misplaced. There’s never a shortage of pundits claiming to have a crystal-clear view of the future. But today’s reality is clear: The world is entering a period of elevated and prolonged unpredictability. Trade wars are messy, tariffs are blunt instruments, and unintended consequences are the norm, not the exception. Now is not the time to bet on whether President Trump wakes up on the right side of the bed.
In turbulent times, diversification becomes not just important – it becomes essential. Yet many investors have lost sight of what true diversification means. Recent years have punished those who strayed from the narrow path of U.S.-centric investing. America was a one-way trade. Why diversify when one country seemed to deliver all the returns?
But that illusion is breaking down. Today’s environment demands genuine global diversification – across geographies, sectors, and asset classes. Yet most portfolios remain dangerously concentrated, particularly in overvalued U.S. technology stocks. Think of global diversification as financial Kevlar. It may dampen some upside in the good times. But its real value lies in protecting against serious drawdowns. Never take the Kevlar off.
Fears of a deglobalizing world are intensifying. But investors should recognize that upside scenarios remain firmly in play. Trump’s weakness? He’s a deal junkie. In the coming days and months, expect negotiations – whether with friendly Asian economies like Japan and South Korea or with geopolitical rivals like China. Few things seem to bring Trump more joy than announcing a “tremendous” deal.
Beyond politics, consider the resilience of the global economy. While the U.S. remains the world’s largest economy, its share of global goods imports has shrunk to 13% – down from nearly 20% two decades ago. It remains a major player, but no longer the primary driver of global trade growth. That role now belongs to Europe and, more recently, China – both of which remain committed to advancing free trade.
And forget comparisons to the 1930s. The world has changed. The U.S. now commands a far smaller share of global GDP, and the perils of protectionism are well understood. Just as Trump’s policies have fueled a surge in Canadian patriotism and sparked a geopolitical and fiscal awakening among Chinese and European leaders, his tariffs are more likely to serve as a cautionary tale for other governments than a model to emulate. Over both the short and medium term, the economic forces driving globalization remain formidable, ensuring its resilience and staying power.
Tyler Mordy, CFA, is CEO and CIO of Forstrong Global Asset Management Inc., engaged in top-down strategy, investment policy, and securities selection. This article first appeared in Forstrong’s Insights page. Used with permission. You can reach Tyler by phone at Forstrong Global, toll-free 1-888-419-6715, or by email at tmordy@forstrong.com. Follow Tyler on X at @TylerMordy and @ForstrongGlobal.
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Content © 2025 by Forstrong Global. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission.
The foregoing is for general information purposes only and is the opinion of the writer. The author and clients of Forstrong Global Asset Management may have positions in securities mentioned. Performance statistics are calculated from documented actual investment strategies as set by Forstrong’s Investment Committee and applied to its portfolios mandates, and are intended to provide an approximation of composite results for separately managed accounts. Actual performance of individual separate accounts may vary with average gross “composite” performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history, and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance numbers are net of total ETF expense ratios and custody fees, but before withholding taxes, transaction costs and other investment management and advisor fees. Commissions and management fees may be associated with exchange-traded funds. Please read the prospectus before investing. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
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