Tariffs, Volatility and Opportunity: Understanding What’s Really Happening in the Markets

A tariff is simply a tax on imported goods. When a country brings in products from abroad - say electronics, clothing, or even food - the government can apply a tariff to increase the cost of those goods. 

The idea is that higher import prices will encourage people to buy locally made products instead. In theory, this supports domestic industries and creates jobs. But in practice, it’s a little more complicated. 

Right now, the United States is applying broad tariffs across multiple countries. These tariffs are being positioned as a way to: 

• Protect national security, by reducing reliance on foreign manufacturing. 

• Bring jobs back to America, by encouraging local production. 

• Address what is seen as unfair trade, where other countries apply higher tariffs on US goods than the US applies on theirs. 

But here’s the thing: while these goals may sound reasonable on paper, their real-world impact is far from straightforward. 

One of the main reasons given for introducing tariffs is the US trade deficit. That’s the difference between how much a country imports versus how much it exports. The US currently imports about $1.3 trillion more than it exports each year. That’s a big gap. 

Rather than being a sign of weakness, though, this trade deficit reflects the fact that the US is a high-consuming, high-spending economy. American consumers buy a lot of goods - and many of them are produced overseas, where it’s cheaper to make them. 

Tariffs are meant to reduce that deficit by making imports more expensive, nudging people toward buying American-made products. But that doesn't always work. In many cases, US companies can’t or won’t manufacture these products locally - and even if they could, it would take time, investment, and higher wages, which leads to… higher prices for consumers. 

Financial markets thrive on certainty. Investors want to know what to expect - even if it’s not always good news. When a government suddenly announces sweeping tariffs, and there’s no clear plan or timeline, it sends a strong signal to markets: “We don’t know what’s going to happen next.” 

That uncertainty is what causes market dips. 

We’ve seen exactly that in recent days. The S&P 500, a key index of US stocks, fell nearly 5% per day over two days at the back end of last week as investors reacted to the possibility that tariffs might stick around and slow global trade. But here's the key: markets haven't crashed completely - and that tells us something important. Despite the headlines, investors believe there will eventually be a resolution. They just don’t know when.  The issue is the longer this goes on, the more likely we are heading for a big drop. 

Right now, we’re watching how this situation unfolds. There are really three possible paths forward: 

1. Worst Case: The US doubles down, tariffs stay in place, and global trade breaks down. Countries stop trading with each other and everyone starts manufacturing everything themselves. This leads to a global recession and long-term economic damage. 

Highly unlikely. 

1. Best Case: This is just a bold negotiation tactic. Countries come to the table quickly, deals are struck, and tariffs are rolled back. Global trade resumes, and markets breathe a sigh of relief. 

Possible, especially if talks begin soon. 

1. Most Likely: Somewhere in the middle. Negotiations take time. Some tariffs stay in place longer than expected, creating short-term uncertainty and a slowdown in global investment. But eventually, deals get done, and markets recover. 

This is the path we’re planning for. 

Here’s the most important part: this is not the time to panic. 

Volatility in the market is normal. It’s the price we pay for long-term returns and it is the price of admission!  

If you want your investments to grow meaningfully over time, you have to expect some bumps along the way. In fact, history tells us that some of the biggest gains come right after the biggest drops. 

If you sell when things are low, you risk missing those rebounds. 

That’s why at Hoxton Wealth, we don’t just react emotionally to the news. We act with discipline. And that means: 

• Not rushing to sell equities just because markets have dropped. 

• Holding diversified portfolios that include stable assets like bonds and gold. 

• Making tactical adjustments within our investment funds when opportunities or risks appear. 

Right now, for example in the HCM fund range, we’ve reduced our exposure to US equities, and we’ve increased our positions in gold and long-dated government bonds — assets that tend to do well in uncertain times. 

This is why we structure portfolios the way we do. So that when markets move, we can adapt on your behalf, without needing to call every single client and ask what they want to do. 

Bonds — particularly government bonds — have shown their value in the past few days. While stock markets dropped, many bonds held their value or even went up. This is why we recommend fixed income in most portfolios, especially for clients approaching retirement or needing access to cash soon. 

They provide stability when equities are volatile. 

We’ve also seen alternative investments like private credit and income-focused funds offer protection. These don’t swing as wildly in value and often keep generating steady income even during turbulent times. 

This isn’t the first time markets have wobbled, and it won’t be the last. But every dip we’ve seen - from the Great Depression to the dot-com crash to COVID-19 - has eventually been followed by a recovery. Often a strong one. 

Volatility isn’t something to avoid. It’s something to embrace, understand, and manage. It’s what gives you the opportunity to buy good companies at lower prices. It’s what allows long-term investors to outperform short-term traders.

As Warren Buffett once said: 

“The stock market is a device for transferring money from the impatient to the patient.” 

So ask yourself: 

• Do you want to panic sell and lock in losses? 

• Or do you want to stay calm, stay invested, and take advantage of opportunities? 

Even better — do you want to lean in, and invest more while prices are low? 

Stay the course. Don’t let headlines shake your long-term strategy. 
Stay diversified. Hold a mix of equities, bonds, gold, and alternatives. 
Stay engaged. Talk to your financial planner if you’re unsure or nervous. 

We’re here to help you make the right decisions — not just for today, but for the decades ahead. Our team is active, informed, and constantly reviewing portfolios to make sure we’re well positioned, whatever comes next. 

This moment, like all challenging periods in the market, will pass. The question is: will you be prepared to benefit from the rebound? 

At Hoxton Wealth, we believe the answer is yes — as long as we stay disciplined, stay invested, and focus on what matters most: your long-term financial future.