The three charts below show very different levels of concern about U.S. economic policy and higher tariffs. The amount of news coverage of the economic uncertainty surrounding tariffs exceeds that of 9/11 and rivals that of Covid and the 2008/09 Financial Crisis. To the contrary, investment markets seem unconcerned. Equity volatility and credit spreads have moved only modestly higher, and neither are at elevated levels. The collective wisdom of markets understands that although there may be some economic stress, consumers, Fed policy, and companies are adaptable.
Having successfully navigated several prior periods of elevated uncertainty, most investors have learned to monitor but largely be unreactive to headline risks. The successful long-term investor’s thesis is to own long-term, compounding and recurring cash flows. The lack of panic in markets shows that most investors realize that it would require an extraordinary amount of disruption to change the long-term prospects of markets and companies.
Ben Franklin once said that in this world nothing is certain except death and taxes. Corporate adaptability and recurring cash flows may not be as certain as death and taxes, but they should be sufficiently reliable to give experienced investors and markets confidence.