The old saying attributed to Ben Franklin is “nothing is certain except death and taxes.” Given what has happened in the financial markets over the past few months, I thought I would take some editorial license and title this update Death and Tariffs. The recent passing of Pope Francis reminds all of us that death is inevitable. Even the best doctors, millions of prayers, and a life dedicated to a higher purpose allow no one to escape death. The tariff issue is much more complicated.
One key thing I learned early in my investment career is that financial markets do not like uncertainty. I have written about this topic many times over the years. Most of us do not like uncertainty. Most of us enjoy some form of routine. A good sleep, a cup of coffee and reading a newspaper are things that make my days better. When my morning does not start that way, it can throw off my entire day. My ability to plan the day and assign a to-do list gets off to a bad start. Similarly, all the noise around tariffs has made it difficult for companies and financial markets to plan too. No sleep, no coffee, and no paper for a lot of us.
The level of tariffs and purpose of them (revenue or renaissance in American manufacturing, or both) have been in constant flux, as has been the changing narrative from our leaders. As an investor, buying, selling, or holding is a difficult decision when the headlines are changing daily. As I write this, we have just finished a good week in the markets. Fed Chair Powell has been told his job is safe and tariffs with China seem to be cooling. However, I am not convinced that we are not just one potential tweet away from everything changing again.
In simple terms, a tariff is a tax; somebody must pay for it, whether it is the manufacturer or the purchaser. Just like taxes, companies and consumers will do as much as they can to avoid paying them. The financial markets are just reflecting investors’ opinions of the winners and losers based on the stated policies. The problem is that the policies are changing at a faster pace than the market can digest.
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So, is there any good news about all this market volatility? There are a few positives. One, perhaps unintended, consequence is that fear in US stocks has helped money flow into international stocks. Most of our diversified portfolios have international stock exposure and that has been good in 2025. Second, the death of the 60/40 portfolio, a historical standard for decades of 60% growth (stocks) and 40% income (bonds), has been greatly exaggerated. Most bonds have held up well in 2025 and are paying attractive interest rates, benefitting our diversified portfolios that have a healthy allocation to bonds. The third positive relates to one of Franklin’s certainties in life: taxes. Come April, many investors are unpleasantly surprised by the amount of capital gains taxes they owe. Two consecutive years of strong markets will do that. The good news is that market volatility over the past month has provided us with the opportunity to make some trades in taxable accounts that can lower potential future capital gains. I have stated before, no one likes paying taxes, even on gains in wealth.
What, if anything, should investors do differently in these volatile times? The consistent answer you have heard from me for decades is to do very little. Stay invested and stay diversified. Like death and taxes (and tariffs), capitalism has always found a way to compete and thrive. Whether taxes were high or low, politicians were Democrats or Republicans, or interest rates were high or low, financial markets have always found a way to move higher in the long term. If you are living on a reasonable budget and invested prudently, this too shall pass. If you are concerned that you are not on a safe track, see your Bill Few advisor. I wish you all a wonderful summer.
Mike Kauffelt, CFA
