As all are aware, the stock market has come under intense pressure in recent days, driven by rising uncertainty surrounding U.S. trade policy. On April 2nd, the Trump Administration announced a sweeping new tariff package, including a 10% baseline tariff on imported goods from most countries and additional, reciprocal tariffs on dozens of others. While we will not attempt to unpack every detail, what matters to us, and to markets, is that the scope and scale of these proposed measures significantly exceeded expectations.
If fully enacted, these new tariffs would raise the U.S.’s overall weighted average tariff rate to 23%, the highest in over a century. Markets are reacting accordingly. U.S. and international equity indices have sold off sharply, reflecting growing concern about what these policies could mean for the global economy. Meanwhile, high-quality fixed income has rallied, as investors seek refuge from the uncertainty. It will take time for markets to fully digest what all of this may mean for inflation, economic growth, interest rates, and corporate profits, particularly if other countries respond in kind. China, for example, has already announced a 34% tariff on U.S. imports. These kinds of retaliatory actions raise the stakes and complicate the market’s ability to accurately price risk. We are actively monitoring developments on this front.
Within this environment, Crawford’s portfolios have held up relatively well. Moments like these reaffirm our core investment principles: invest for the long term, stay fully invested, and emphasize quality. High-quality companies and securities tend to have defensive characteristics that support portfolios during turbulent periods, which is precisely what we are seeing now. We are very pleased with the relative performance of our portfolios and have confidence that the quality characteristics will continue to persevere in the face of uncertainty.
From a macroeconomic standpoint, the fear is that new tariffs will drive up input costs for businesses and prices for consumers, while also dampening confidence and spending, a mix that could lead to higher inflation and weaker growth. The Federal Reserve, for its part, is clearly watching. Chairman Powell acknowledged on April 4th that he is concerned about the inflationary implications of the proposed tariffs. We do not yet know where we will land, and neither do markets. But in periods of heightened uncertainty and volatility, the case for quality and discipline becomes even more compelling.
In times like this, when there is so much uncertainty regarding the macroeconomic environment, the best thing to do is focus on the individual companies to determine how much they are threatened. Here we have confidence. We continue to invest in businesses with durable competitive advantages, strong balance sheets, and the ability to generate consistent cash flow through the cycle. These attributes help insulate portfolios from external shocks and allow investors to participate in recovery when sentiment inevitably turns more positive. As always, we remain committed to a long-term, fundamentals-based investment approach, and to helping our clients stay the course through uncertain times. Over our history we have seen markets decline many times. All recovered, some quickly. Our emphasis on quality has always worked to our clients’ benefit by preserving value, ultimately leading to a more rapid recovery.
Disclosures:
Crawford Investment Counsel (“Crawford”) is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about Crawford, including our investment strategies, fees, and objectives, can be found in our Form ADV Part 2 and/or Form CRS, which is available upon request.
The opinions expressed are those of Crawford. The opinions referenced are as of the date of the commentary and are subject to change. Crawford reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.
Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Past performance is no guarantee of future results. Forward-looking statements cannot be guaranteed.
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