A real ‘oh, sh**’ moment… The market drops big after Trump’s tariff announcements… A higher ceiling and a higher floor… Will negotiations happen?… Greg Diamond: The low for the year could be near… Why diversification matters…

Talk about poor timing…

Yesterday, after the market closed and as the world began to digest President Donald Trump’s “Liberation Day” tariff announcements, furniture retailer RH (formerly called Restoration Hardware) was holding its scheduled quarterly earnings call.

The company’s CEO, Gary Friedman, was in the middle of trying to explain away why shares of the stock were already down (amid a poor earnings report). That’s when he evidently pulled up a chart of RH shares while on the call to check the latest price. His reaction was clearly unscripted…

Really? Oh, sh**. OK. I just looked at the screen. I hadn’t looked at it.

RH shares were on their way to what today became a 40% drop…

These formal Wall Street analyst conference calls rarely have real moments like this. But Friedman echoed what a lot of people were thinking. Same goes for today.

A big market drop…

Summing up his giant round of taxes on U.S. imports, Trump said he’d been very “kind.” The market didn’t agree.

Today, the benchmark S&P 500 Index lost almost 5%, the tech-heavy Nasdaq Composite Index almost 6%, while the Dow Jones Industrial Average was down 4%, and the small-cap Russell 2000 Index lost 6.5%. Global and U.S. oil prices dropped by almost 7%.

Plus, the 10-year Treasury yield is now close to 4%, after being at 4.8% just before Inauguration Day. That points to lower longer-term growth expectations than a few months ago.

I (Corey McLaughlin) wrote to you last evening with the nuts and bolts of Liberation Day, circa 2025…

Late yesterday, Trump announced that the U.S. would charge “countries throughout the world” new tariffs equivalent to approximately half of what the White House deemed as “the combined rate of all their tariffs, non-monetary barriers, and other forms of cheating.”

Additional tariffs on China would be 34%, on top of the 20% previously announced – so 54% in all. Trump also imposed a blanket 10% tariff on all U.S. imports, even from countries like Australia with which the U.S. has a trade surplus (meaning we export more to that country than we import).

As we mentioned yesterday, Trump showed a chart with the numbers, and the White House later shared it (along with others totaling new rates on about 180 countries total)…

The reason? Decades of trade policies that have been terrible for the U.S. and generate gargantuan trade deficits, Trump said. The goal with these tariffs – which American businesses will pay to Uncle Sam on imports from foreign nations – is to “make America wealthy again.”

That may be so, but what these plans did for now was crush a market that has already been responding negatively to tariff policy. This move lower was a heightened version of the volatility we’ve seen in 2025, and some stocks got hit much more than others…

Like RH… which was the biggest loser of all the Russell 1000 large-cap companies today, mostly because it sources many of its products from Asia.

But the sell-off was widespread. Eight of the 11 S&P 500 sectors were down at least 2% today, with energy (down roughly 8%), tech (down about 7%) and consumer discretionary stocks (6%) the biggest losers.

A good, big question (and an answer)…

By now, we know why Trump says he’s doing this… He says it will generate hundreds of billions of dollars in revenue and help cut into the nearly $2 trillion U.S. fiscal deficit. A worthy cause, but at what expense?

Higher inflation could be one, and we don’t know what else. Bloomberg estimates the new average tariff rate if these current numbers hold would be 22%, the highest rate since the early 1900s and 7 times the rate in 2021.

But where did these tariff numbers come from? An oddly specific 34% of additional tariffs on China… 46% on imports from Vietnam… or 49% from Cambodia? As subscriber Hubert O. wrote in last night with a reasonable request…

It would be nice to see a list of tariffs and the amount that is charged by other countries. Not that any politician wouldn’t embellish the numbers to prove his or her point. However, the numbers that the President tossed out today seemed unbelievable to me. I honestly don’t know what the tariff amounts other countries charge the USA. If Trump’s numbers are accurate (?) then why has it taken our country so long to address this issue.

Of course, Hubert’s not alone in the questioning. Immediately after yesterday’s press conference, a lot of market observers and participants tried to figure out the same thing…

The numbers are, of course, important themselves. But so is how the Trump administration arrived at them.

Here’s the deal, which we and other people figured out and the White House confirmed after Trump’s press conference yesterday…

The percentages are not “reciprocal” on rates currently charged on U.S.-made products. The percentages are instead tied directly to nominal trade deficits with other countries. These are two different things, and that’s telling about Trump’s intentions.

I am not making this up: The White House arrived at the numbers by calculating the U.S. trade deficit with a particular country and simply dividing it by imports (and of imported goods only, not services). As journalist James Surowiecki pointed out on the social platform X yesterday…

So we have a $17.9 billion trade deficit with Indonesia. Its exports to us are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges us.

And then the Trump administration cut that percentage in half unless it ended up below 10%, in which case that nation would be tariffed by 10%. (That includes places like the Heard Island and McDonald Islands near Antarctica… home to glaciers and penguins, not people.)

Perhaps this is why Trump repeatedly said in recent weeks that he didn’t schedule “Liberation Day” on April 1 – April Fools’ Day – because it might have been taken as unbelievable.

With that explainer out of the way, let’s get into what this all might mean moving forward…

Our Stansberry’s Investment Advisory editor Whitney Tilson wrote a terrific synopsis of everything in his free daily e-letter earlier today…

To me, those charts from the administration look more like political propaganda… which actually is good news.

I would be more worried if the proposed reciprocal tariffs were based on a genuine analysis of the various trade barriers place upon us by the countries with whom we have the biggest trade deficits, such as this one from Bloomberg posted on X by my friend and former colleague Enrique Abeyta:

To be clear, I think Trump is serious about reducing our trade deficits – part of the larger grievances he has long held against our allies who, he believes, are taking advantage of us…

Whitney cited the fact that Trump has been wanting to do something like this since the 1980s. (We’ve pointed this out before, too, as with this old interview from Trump with late-night talk show host David Letterman.) Whitney continued today…

But the fact that the new proposed tariffs are rooted in such a nonsensical calculation of the “tariffs” other countries are imposing on us indicates to me that what we’re seeing here is Trump the dealmaker.

Yesterday’s announcement is mostly likely an opening gambit to force other countries to trade with us on better terms.

What could happen next in this ‘movie’…

As I wrote yesterday, Treasury Secretary Scott Bessent says that whatever tariffs were announced yesterday are intended to be a “ceiling” rather than “floor.”

However, that ceiling turned out to be higher than expected… and so did the floor (with the 10% blanket tariff on all imports). To carry the metaphor forward, the framework looked more like a house on stilts.

Former Trump Treasury Secretary Steve Mnuchin got the call today to try to explain things further. In an interview on CNBC, he said…

I do hope there’s the ability to negotiate them down, because, as we’ve seen for certain businesses, it is going to take a long time to move that manufacturing base… And we’ve seen the stock market, particularly in certain stocks, react pretty negatively.

Eric Trump, one of the president’s children, also alluded to room for negotiation in a post on X…

I wouldn’t want to be the last country that tries to negotiate a trade deal with @realDonaldTrump. The first to negotiate will win – the last will absolutely lose. I have seen this movie my entire life.

We will see if this particular movie, Trade War, Part II, plays out the same way. This morning, Commerce Secretary Howard Lutnick, one of the architects of the plan, went on CNBC and said…

I think what there’s going to be is a world of fairness. Let’s go try to figure out ways for the world to treat us more fairly and more properly.

Today, Trump appeared to claim victory in a social media post in the “Liberation Day” endeavor already, writing…

THE OPERATION IS OVER! THE PATIENT LIVED, AND IS HEALING.

Trump repeated this analogy when talking to reporters this afternoon and predicted that the stock market “will boom.” Of course, the effects of the tariffs haven’t been realized yet.

What we know is how the market reacted so far…

The backdrop looks like this in the short term. As our Ten Stock Trader editor Greg Diamond wrote in an update to subscribers this morning…

President Donald Trump’s tariff plan went into effect today, and the stock market isn’t liking the news at all.

So what does this mean for the market going forward?

Greg then shared his analysis about what this tariff throwdown might mean for Federal Reserve policy… and how this fits in with the scenario he has been tracking lately – which is the possible end of what has been a very long market correction.

If you’ve been following along with Greg lately, he has his eye on two possible outcomes for the sell-off in stocks widely seen this year. One of these would have happened in late March and another into this month (coinciding with earnings season). Greg continued…

A few questions/thoughts…

1) How long can the Trump administration, as well as the Federal Reserve, withstand the stock market volatility?

2) Is this similar to what we saw in late 2018 when Trump almost forced the Fed to start cutting interest rates? (Stocks then rallied.)

3) This setup likely confirms the “worst case” scenario we’ve been tracking with volatility into earnings…

If I’m correct about this “worst case” scenario with a low into earnings, it could mark the low for the entire year.

So we could see a flush in the market that really spooks investors. But that could be the best time to get aggressive and buy fear/weakness, given the corrective move in the stock market.

Earnings season begins late next week with the big banks, which Greg will be watching closely. As he also explained in a free live video this afternoon, he’s gauging the performance of multiple sectors (semiconductors, Canadian stocks, etc.) and is actually getting ready to turn aggressively bullish – when the time is right.

As he said today, Greg sees the recent market performance as a “healthy correction of a much larger bull market.” You can watch his full video for free on our YouTube page here. (While you’re at it, be sure to subscribe to make sure you get all of our free video content.)

At the same time, there were gainers today…

I keep harping recently on insurance company W.R. Berkley (WRB), a longtime Stansberry Research favorite, and for good reason. It’s the type of high-quality business whose shares will likely serve you well in good times and bad. Shares were up almost 1% today.

Chocolate-maker Hershey (HSY) shares were up more than 1% after news that it will acquire an organic-popcorn giant, LesserEvil, for about $750 million. As a sector, the typically defensive consumer staples were the only of the 11 major S&P 500 sectors that rose today, as almost every other area got beat up.

Bond prices, which trade inversely to yields, also got a lift. All of these areas may be places you want to have some exposure… especially if cooler heads don’t prevail, tariffs keep escalating in a growing global trade war, and the U.S. and global economies slow.

Remember the value of diversification…

It’s easy to forget about proper diversification during the good times.

During long bull markets, investing more into high-flying stocks may seem like a great idea. But that allocation comes at a cost during corrections and bear markets.

As our colleague Alan Gula wrote in the most recent issue of The Total Portfolio, part of our Portfolio Solutions suite whose latest updates came out on Tuesday…

On the flip side, you’re likely to have better long-term returns with a less-volatile portfolio. Not only that, but a less-volatile portfolio will also help you sleep better at night. And you’ll be less likely to make emotional decisions under duress because your losses will be smaller in times of market stress.

And that has helped The Total Portfolio – which is designed for those who want to “get rich” and those who want to “stay rich” – limit its losses during what Alan described on Tuesday as the “Tariff Tantrum.” As Alan wrote…

Many investors out there panicked during the recent 10% correction in U.S. stocks. Our subscribers did not. Those who followed our advice saw far smaller drawdowns in their portfolios over the past few weeks than the average investor.

Growth stocks have performed the worst in the sell-off of this year – with the S&P 500 entering a formal “correction” (down 11% of as of today from previous high)… and the Nasdaq Composite Index down about 15% since a high on February 19.

The small-cap Russell 2000 Index entered a fresh bear-market trend today – down more than 20% from its previous high in November. (When you zoom out, though, small caps have never quite escaped the bear market of 2022… The Russell’s most recent high in November 2024 basically matches that of November 2021.)

And, as we’ve noted, the Magnificent Seven stocks previously entered a bear market last month.

A simple “diversified” fund – the conventional “60-40” stock-bond portfolio, as represented by the Vanguard Balanced Index Fund (VBINX) – hasn’t been hit as hard lately, with a 6% drawdown (as of earlier this week). But as Alan wrote to subscribers…

The Total Portfolio held up even better, with a maximum drawdown of just 2.2%. If you weren’t reading the news, you might not have even noticed the market sell-off.

This next chart shows our model portfolio’s performance versus the S&P 500 and the Vanguard Balanced Index Fund…

Now, to be clear, this chart represents performance through Monday’s close, based on when The Total Portfolio published. But the point remains… This is exactly what the service set out to do. Its portfolio holds a balanced basket of stocks with a long-term investing horizon.

It may underperform when stocks are ripping higher (which earned The Total Portfolio a B- grade for one-year performance our latest annual Stansberry Research Report Card). But the strategy is built to do better than the market in the long run.

For five-year performance, The Total Portfolio earned an A+ grade in our most recent Report Card – and more than doubled its benchmark’s average annual return. If you haven’t checked out our Portfolio Solutions products in a while, now’s a great time.

In The Total Portfolio, you’ll find two sub-portfolios… one designed specifically for “get rich” investors strongly built on the concept of “capital-efficient compounders,” and a “stay rich” group of investments that, among other things, includes a handful of consumer staples, high-quality insurance businesses, and gold stocks.

The past month is just an example of what a well-built portfolio can do…

It highlights exactly what Alan and the rest of the Portfolio Solutions investment committee set out to do. So did this timely tweak to The Total Portfolio that Alan recommended on Tuesday: selling a position in Nike (NKE) – which lost almost 15% today…

We were optimistic that the shoe retailer’s new CEO, Elliott Hill, who took over last October, would be able to right the ship. And we still think he will, except it will take a lot longer than initially expected.

Nike will need additional markdowns to clear old inventory. Plus, there are consumer-spending concerns amid a trade war environment.

Cutting losers is a necessary part of managing portfolio risk. So, since shares have been underperforming, it’s time to close our Nike position.

No one can foresee what lies ahead, so we can only rely on probabilities. What we do know is that holding a portfolio with relatively low volatility and limiting drawdowns will give you the best chance of achieving high returns over the long term.

Over the long term, we’re willing to bet this kind of outperformance continues (we’ll check back in next month). That’s a great spot to end one of the worst days for “U.S. stocks” in years: with a tip of our cap to The Total Portfolio and a disciplined approach paying off.

New 52-week highs (as of 4/2/25): Antero Resources (AR), Berkshire Hathaway (BRK-B), Cencora (COR), Enel (ENLAY), EQT (EQT), Fidelity National Financial (FNF), SPDR Gold Shares (GLD), Kinross Gold (KGC), London Stock Exchange Group (LNSTY), Paychex (PAYX), Sprott Physical Gold Trust (PHYS), Royal Gold (RGLD), Republic Services (RSG), Tradeweb Markets (TW), ProShares Ultra Gold (UGL), United States Commodity Index Fund (USCI), VeriSign (VRSN), and Wheaton Precious Metals (WPM).

In today’s mailbag, more thoughts on the tariffs… Keep your thoughts and questions coming. As always, e-mail us at feedback@stansberryresearch.com.

“All of you are overly optimistic about the effect of these tariffs (taxes) on the American consumer. This economy will tank because people just can’t afford these increased prices.” – Stansberry Alliance member Betsy C.

“Why do people continue to confuse ignorance and revenge for an economic policy?…” – Subscriber Sandra D.

“Why no tariffs on Russia????????????” – Subscriber Nate Y.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
April 3, 2025