Volachillity 2025: A Tariffic Opportunity in the Making

“As every scuba diver knows, panic is your worst enemy: when it hits, your mind starts to thrash, and you are likely to do something really stupid and self-destructive.”  − Daniel Dennett

April 6, 2025 

Just over two weeks ago, I wrote “Take My Hand.”  It was intended to warn that the market decline up to that point wasn’t a crash or a plunge but that the increasing level of policy uncertainty coupled with extreme valuation had the potential to result in a much more serious decline. It’s no coincidence that we were holding more cash than at any point in the past few years. My hope was that we would get a much more serious sell-off so we could put that ample cash back to work. Here are a few key lines from that hand-holding piece:

• "Make no mistake, there will be another actual crash or plunge at some point, but 10% ain’t it.”

• "If we can get a healthy drop in the markets during this ‘detox’ period, all the better.”

• "We have plenty of cash currently, so I’m all for increased volatility, confusion, and fear with even a whiff of crash or plunge.”

• "We'll see more and fatter pitches if the recent market correction accelerates, so don’t worry if things do in fact get ugly in the near-term. I’m hoping for it.”

It looks like I’m getting what I hoped for! The S&P 500 closed Friday about 17% below its high with the NASDAQ off over 22%, officially in bear market territory.  The catalyst for last week’s panic was the official announcement of Trump’s tariffs. I must admit to being a little amused and confused that this came as a surprise to anyone.  Say what you will about Trump, but he tends to be blunt and transparent and has been very clear about his plans, as have key members of his cabinet. Nevertheless, investors were clearly surprised by the announcement and sprinted for the exits.

A few key points I want to share with you as another fascinating week is about to begin:

1.    We dipped a couple of toes in the water during this market rout as the panic created some terrific bargains.  Emotions are high and the overall market is still far from attractively valued, so we’re careful in these situations to not just pick a single spot and invest all our cash.

2.    We have two key advantages. The first is finding compelling investment opportunities. The second is having the patience to let them play out. I expect triple digit returns over the next 2 to 3 years from some of the names we’re buying right now, but they may fall quite a bit further first. We’ll be increasing our purchases the further they fall, and we’d actually prefer a steeper decline before they bottom.

3.    I’m in my element during panics. I’ve yet to be surprised by one, and I’ve always had cash ready. I thoroughly enjoy being able to bargain hunt when others are panicking.

4.    The quick market decline may be unsettling, but we’d much rather have a rapid market collapse than a prolonged multi-year bear market.        

5.    The media nearly unanimously views these tariffs as somewhere between ill-advised and batshit crazy. We’re told that Trump and his team are incompetent and dangerous. I don’t share this view. Over the years, Trump has been known to stake out aggressive initial positions. This sets a baseline for counteroffers and allows him to ultimately give some ground and still get what he wants. If Trump is willing to sell you a watch for $50, he’s going to offer it for $100 and tell you all the reasons it’s worth $150 before selling it to you for $80.

We are a huge market for much of the world, and the potential loss of trade will hurt smaller, more export-dependent countries much more than us. The fact that Trump’s proposal is seen as aggressive is actually very positive as it will compel countries to resolve this issue as quickly as possible. It’s been just a few days, and we’re hearing that dozens of countries have reached out to the White House to start trade negotiations. Taiwan and Vietnam have already proposed a zero-tariff framework. I expect to hear more such announcements and deals in the days and weeks to come.

The markets hate uncertainty, and we’re at peak uncertainty on this issue. Once it becomes clearer that this issue will be resolved satisfactorily for just about everyone, we’ll get a significant relief rally.  Depending on how much buying we’re able to do prior to then, we may lighten up some when that rally comes.

6.    As I write this, the futures market is down nearly 4%, indicating another panicky day ahead. However the next few days unfold, the markets are oversold short-term, and I’d expect to see a strong bounce soon, even if it proves temporary.  Remember, the strongest market days tend to come during bear markets.

In sum, we’re getting the sell-off and panic I’d hoped for, and we have the cash to take advantage of it. We’re getting an opportunity to set the table for strong returns in the years ahead, and I’ll be more aggressively buying the lower the markets go from here. Uranium is a steal as are an increasing number of energy and transportation names. I’m also finding some strong yield opportunities for more conservative clients, allowing us to boost yield with some good capital appreciation potential.  We’re getting some of those fatter pitches I was hoping for two short weeks ago.

Best,

Ken Bell, CFA, MBA, American Picker

Aspera Financial, LLC

The Market Rubbernecker is associated with Aspera Financial, LLC, an investment management and financial planning firm based in the Cary, Raleigh, and Durham area of North Carolina. This and all Market Rubbernecker missives and musings (written, oral, or mimed) are subject to the disclaimers, disavowals, and hindquarter-coverings found at www.asperafinancial.com/aboutrubbernecker.