What’s Driving the Recent Market Volatility?
Over the past few weeks, market volatility has once again taken center stage. At Capital Wealth Advisors, we’ve been closely watching the developments, and while volatility isn’t new, the recent triggers are worth dissecting.
Let us take a step back. For the past four years, we’ve been signaling a few key ideas: valuations have been high, and U.S. large-cap growth stocks have dominated performance for an extended period. That kind of dominance tends to signal an eventual shift, even if we couldn’t predict what specific news might catalyze it.
Recent tariff announcements have sparked renewed volatility. These are not minor tweaks — we’re now looking at some of the highest U.S. tariff levels in a century. This shift is altering the market landscape. What’s particularly noteworthy is how the market responded: not just equities dropping, but bonds and the U.S. dollar weakening as well. That kind of simultaneous decline across traditionally uncorrelated asset classes is rare, and a signal that something bigger may be underway.
This environment has started to breathe new life into areas that have long lagged. We’re seeing international stocks outperforming U.S. markets. Value stocks are gaining an edge over growth. And gold? It’s hitting a new all-time high. These trends suggest a shift in leadership — one that could provide fresh opportunities for investors willing to look beyond the familiar.
Understanding the U.S. Tariff Strategy
One of the key questions that’s come up is: What is the Trump administration really trying to achieve with these tariffs? From our view, the goal appears to be revitalizing U.S. manufacturing and creating more high-paying jobs, particularly those that support the middle class, which has felt the squeeze of globalization and rising trade deficits for decades.
This isn’t unprecedented. Back in 1971, President Nixon also faced concerns over large trade deficits and an overvalued U.S. dollar. In response, he devalued the dollar and imposed tariffs to push trading partners back to the negotiating table. We may be witnessing a modern version of that strategy — ambitious, certainly, but not without historical precedent.
Another layer to consider, some speculate that the ultimate goal may not just be about tariffs, but about restructuring U.S. trade relationships, particularly with China. The idea could be to build a coalition of allied trading partners, moving production to countries like Mexico, Brazil, or Honduras, where labor costs are low but geopolitical risk is less concerning than with China. COVID underscored the fragility of complex global supply chains, and reshoring — or “friend-shoring” may now be a matter of national security.
Positioning for a Changing Investment Landscape
What does all this mean for us at CWA — and more importantly, for our clients?
We manage a number of internally developed investment strategies, several of which include international exposure. That gives us the flexibility to adapt to changing market conditions and pursue opportunities wherever they arise.
If the landscape is indeed shifting — and we believe it is — we’re confident in our positioning to capture value from areas that have long been overlooked. The next cycle may reward a different set of leaders, and we’re prepared to respond accordingly.
Ready to Navigate Volatility with Confidence?
Have questions about how these shifts could impact your portfolio? Click the button below to contact us at Capital Wealth Advisors to learn more about how we’re endeavoring to position for success in a rapidly changing global environment.
