Tariff-driven market volatility: Our response

As I write this on April 4th, the S&P 500^® has declined by 9% in just four days. At Frontier Asset Management, our response mirrors that of previous market shocks. With over 25 years of experience, we recognize certain market principles that remain constant:

1. Long-term investment rewards: Investors who stay the course during market fluctuations are often rewarded. Patience and discipline are key to weathering downturns and reaping the rewards of long-term growth. While tariffs present unique challenges, corporations will adapt to changes in costs and demand.

2. Understanding market risks: Risk is an inherent part of investing. Frontier manages risk in a number of ways, most importantly by maintaining broad diversification by asset class, geography, strategy, and manager, as we are not beholden to any one fund family. Coming into 2025, our strategies were weighted towards areas of the global market that we thought were priced more attractively, and thus provided not only higher expected returns, but a greater margin of safety as well. Thus far, international large and small caps, as well as emerging markets have held up better than pricier U.S. stocks. Our fixed income positioning was similarly more diversified than many of our peers across higher yielding, but shorter duration areas of the market. While duration has paid off nicely over the last couple of days, concerns about higher inflation make us comfortable with our existing exposures.

3. Catalysts for market correction: The past decade has seen a robust market, and many investors anticipated a correction. We feel the current tariff situation serves as a catalyst for necessary price corrections.

4. Improving long-term expectations: Although it may be challenging to acknowledge during a downturn, long-term expectations for equities improve when prices fall. At Frontier, we will seek out long-term investment opportunities without attempting to time market bottoms.

5. Anticipating continued volatility: We expect market volatility to persist for several months as tariff policies evolve through negotiations with foreign governments.

6. Inflation concerns: The implications of tariffs on inflation will be a critical consideration for investors moving forward. Currently, we think bonds are providing adequate diversification and risk management, but we must remain vigilant regarding inflationary pressures.

7. Preference for active management: Frontier favors active managers who demonstrate an understanding of their investments and supply chains, especially in down markets. We trust their ability to navigate these challenges effectively.

Our commitment

Frontier Asset Management’s commitment to supporting financial advisors and their clients remains unwavering. We understand the importance of maintaining a steady hand during market uncertainty, and we’re here to provide you with the resources necessary to guide your clients through turbulent times.

As we closely monitor our strategies and client portfolios, our focus on risk management and the impact of drawdowns on returns and future earnings potential is paramount. By utilizing our educational charts and Risk Guide, you’ll be better equipped to illustrate the value of staying invested and help your clients make informed decisions.