Portfolio Update: Tactical Changes April 2025

The administration showed its hand in April and demonstrated its seriousness in implementing far-reaching tariffs with a methodology and magnitude that seemed to surprise investors. Even as equity markets fell broadly and sharply, the President has remained steadfast in his economic approach - despite growing dissent from supporters such as Wall Street executives, party insiders, and other public boosters. A reversal of course on tariffs now appears unlikely and a significant slowdown in the economy has become the probable result, as the country braces for the real possibility of recession.

Typically, the Federal Reserve would be ready to step in with interest rate cuts to stimulate the economy, but the Fed remains in a “wait and see” mode, as conditions are also ripe for inflationary pressures that would entail interest rate increases. This interest rate dichotomy reflects the complications of a stagflationary environment, diminishing the Fed’s influence and presenting real challenges for bond investors. In the absence of a Congress willing to impose checks and balances, the fate of the global economy appears increasingly concentrated in the hands of one man, the U.S. President.

 The bright side for investors is that those who are in an accumulation phase of life and able to continue to invest new money, asset prices are at a significant discount to their highs and historically stock markets do recover with enough time. For those investors closer to a distribution phase of their life, the first line of defense was sound retirement planning and starting with an appropriate risk allocation to weather the storm and maintain necessary cash flows through a down cycle.

This month Provizr portfolios saw additional risk-reducing tactical changes in bond allocations. In the Core Bond rotation, Intermediate-Term Corporate bonds were exchanged for Short-Term Corporate bonds. In the Specialty Bond rotation, Treasury Inflation Protected Securities replace High Yield bonds. Both tactical changes reflect the goals of reducing default risk, typical of a slowing economy, and positioning for a higher inflationary environment.

Want additional help navigating these turbulent times? Watch our video on how to Avoid Timing The Market

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