Investment Management

Navigating Policy Turbulence: A Balanced Approach to Uncertainty

March 14, 2025

Market trends and investment strategies during economic shifts

Recent volatility in the U.S. markets has some investors concerned. Below, we lay out some of the challenges facing investors today. Importantly, during periods of heightened uncertainty, it’s necessary to underscore the reality that market volatility is a normal occurrence over the long-term history of markets. It is never easy to see it coming, nor is it easy to know when, why or how it ends. Having a well-diversified global portfolio and maintaining a long-term focus can be important considerations during periods of uncertainty.

The current market volatility: Policy uncertainty & economic concerns

The latest bout of market volatility stems from policy uncertainty and related concerns over a potential U.S. economic slowdown. Since mid-February, U.S. economic data has weakened, reinforcing investor caution amid a shifting policy landscape. Concerns about tariffs and federal spending cuts adding downward pressure on the U.S. economy remain top of mind.

U.S. market challenges

U.S. markets, which entered the year with elevated valuations after delivering one of the best two-year periods in market history (2023 and 2024), have encountered challenges in 2025. Back-to-back setbacks—including uneven developments in the artificial intelligence (AI) landscape, as we wrote about in our 2025 first-quarter Insight, and more recently, from a U.S. economic growth scare arising from heightened fiscal policy uncertainty—have weighed on investor sentiment.

The transition from the Biden administration to the Trump administration has resulted in significant shifts in U.S. trade, immigration and foreign policies. Additionally, large shifts in federal spending have been underway, including reductions in the federal workforce, the closure of certain federal departments and a push to shift federal funding to state obligations.

Markets have reacted swiftly, as they typically do when uncertainty rises. The S&P 500 has now posted three consecutive weeks of declines, dropping 10%, while the tech-focused Nasdaq Composite and small-cap stocks, as represented by the Russell 2000, have entered deeper correction territory, down 14% and 18%, respectively, from recent highs. However, past performance is not indicative of future results, and market trends can shift.

Fiscal policy changes: Market impacts of sequencing & pace

The Trump administration’s key policy initiatives—tariffs, tax cuts and deregulation—are well underway. While these measures can provide a net positive impulse for U.S. economic growth over the long term, the pace and sequencing of their implementation have significantly influenced market sentiment.

Thus far, the rapid rollout—particularly the heavy upfront emphasis on tariffs and spending cuts—has weighed on U.S. equity markets. While we appear to be in the “winter” of policy changes and related market adjustments now, investor sentiment could change quickly when the focus turns from the economically punitive impact of tariffs and spending cuts to the more stimulative impact of tax cuts and ongoing deregulation.

Additionally, the sheer volume of policy announcements—83 executive orders issued so far—has created an atmosphere of acute uncertainty. The scope and duration of the U.S. tariff strategy remain unclear, with measures of trade policy uncertainty at their highest levels in 25 years. The administration’s recent practice of announcing and suspending tariffs twice for North American trading partners adds to the uncertainty, complicating upcoming negotiations in Asia and Europe. This will likely continue to drive near-term volatility as investors are more immediately focused on the tariff-related impacts of lower growth, higher inflation and diminished corporate earnings.

With that said, it’s important to note that we’re still in the very early stages of these significant fiscal policy changes. The potential net benefits may take time to materialize. A notable development is the House budget resolution, passed on Feb. 25, which authorizes up to $4.5 trillion in potential tax cuts through 2034. While tax cuts are expected to roll out later this year and could be gradually beneficial over the long term we should expect market volatility to remain elevated until we have more clarity on the final scope of fiscal policy changes.

The U.S. economy: Bending, not breaking

Over the past several years, the U.S. economy has outperformed expectations, driven by heavy federal spending, resilient consumer demand and global leadership in key technologies. The result has been an economy growing at a pace many consider to be above potential—posting GDP increases of 2.9% in 2024 and 2.8% in 2025.

Going forward, U.S. economic growth may slow but could remain positive, settling closer to a long-term equilibrium growth rate between 1.8% to 2%. The labor market remains near full employment, with unemployment at 4.1% and job creation averaging 190,000 per month over the past six months—both indicators that should continue to broadly support consumption.

Additionally, we’ve made significant progress on inflation, particularly for goods and services outside of housing. A slowing economy, a strong U.S. dollar, rising productivity and a 15% decline in oil prices over the past three months should continue to help ease inflation pressures.

None of this is to suggest the U.S. economy isn’t vulnerable to growth or inflation shocks arising from any number of known or unknown events. For the former, tariffs are the primary concern, and forecasts suggest a potential drag on growth and boost to inflation in the 0.5% range for each in 2025 with a range of wider outcomes possible.

The Federal Reserve faces a difficult task—administering monetary policy amidst a slowing economy while material fiscal policy changes are occurring. Should growth weaken further, the Fed has adequate flexibility to adjust policy rates accordingly.

Benefits of diversification: Silver linings beyond the horizon

Initially, the U.S. equity markets reacted positively to the Trump election, with the S&P 500 gaining 7.7% between Election Day and its Feb. 18 peak. However, as policy uncertainty increased, the U.S. equity markets gave back those gains, though they remain within a few percentage points of pre-election levels.

Looking more closely, there’s also a notable equity rotation underway. The narrow tech-led post-pandemic market leadership has changed dramatically, with value-style equities now outperforming growth-style stocks by 8% year to date. This shift has provided downside protection for diversified portfolios in 2025.

While U.S. equities search for a new direction, international equities have moved in the opposite direction which has been a terrific development for diversified portfolios. International equities have advanced roughly 7% year-to-date, buoyed by a striking 20% surge in Chinese and German equities. Notably, potential fiscal policy changes in Germany—particularly a recalibration of the nation’s ”debt brake”—could mark a turning point for one of Europe’s most conservative spenders, offering investors an unexpected tailwind.

Turning to the bond market, post-election, the U.S. Treasury market was initially nervous, with long-term rates moving sharply higher but has settled back to pre-election levels, providing some relief to the mortgage market and allowing investors to earn attractive income. On a total return basis, bonds have advanced 2% year to date and, more importantly, helped to mitigate the higher volatility of U.S. equities.

For those portfolios with allocations to Defensive Equity and Diversifier strategies, those allocations are also providing much-needed balance for portfolios. On a year-to-date basis, those strategies collectively have provided downside protection, diversification and lower volatility while posting positive returns.

An additional silver lining is the reminder that volatile periods are the reason equity investors tend to earn attractive long-term returns, in part due to their frequent nature. However, it’s important to note that past performance does not guarantee future results. Figure 1 illustrates the fact that market declines of 10%-20% within a single year (known as intra-year declines) are common and therefore should be accounted for in financial planning and portfolio construction processes.

Staying the course

For those understandably concerned by market drawdowns and the current administration’s sweeping policy changes, the key message is one of balance and perspective. Over the past few years, U.S. equity returns have been exceptionally strong. Even as we face a correction, the diversified portfolio—now bolstered by positive contributions from international, value-style, defensive equities, along with bonds and other diversifiers—remains fundamentally sound and provides investors with ample flexibility to capitalize on any opportunities arising from ongoing market volatility.

In times of policy turbulence, it is more important than ever to maintain a disciplined investment approach, allow your strategy to work and avoid the temptation to react to sudden repricings—sharp market fluctuations in asset values driven by new economic or policy developments. While short-term adjustments may seem disconcerting, our focus remains on long-term portfolio construction and the strategic identification of opportunities.

Market volatility, no matter the cause, can feel unsettling. But you don’t have to navigate it alone. We’re here to provide guidance, perspective and support during this time. Please reach out to your client service team if you’d like to discuss how this impacts your financial plan.

If you’re not currently a client, we welcome the opportunity to connect. Start a conversation with us—we’d love to help you gain confidence in your financial future.


David Grecsek
David Grecsek

Managing Director in Investment Strategy & Research, Partner

David has been focusing on private client investment management since 1994. At Aspiriant he is heavily involved in the asset allocation, investment due diligence and portfolio construction efforts. He also provides insights related to economic and/or market developments and regularly communicates the firm’s investment strategy to advisors, clients and media. Additionally, David is a member of the Investment Committee and also leads several investment subcommittees for the firm.

Prior to joining Aspiriant, David was a Senior Analyst at Deloitte Investment Advisors in 2003 focusing on multi-asset manager selection for separate accounts, mutual funds, and alternative investments. He assumed Head of Investment Research in 2004, reporting to the Investment Policy Committee regarding capital market expectations, strategic and tactical asset allocation and tax-efficient manager sourcing for over three billion dollars in client assets. David also supported the advisory practice with quarterly market updates and training on asset classes and various investment strategies.

David’s previous experience includes eight years with Merrill Lynch & Co., Inc. supporting one of the industry’s largest managed accounts platforms through various investment research and risk management roles.

David received a Finance M.B.A. from The Graduate School of Management at Rutgers University and received a B.A. in Liberal Arts from The College of New Jersey. He has obtained the Chartered Financial Analyst® (CFA) and Chartered Alternative Investment Analyst (CAIA) designations and is a regular member of the CFA Institute, CAIA Association and the New York Society of Security Analysts (NYSSA). David is also a member of the Private Wealth Management and Alternative Investment Committees for NYSSA.

David and his wife Holly live in Brielle, NJ with their son and two daughters. David was a four-year letterman for the men’s soccer team and enjoys playing and coaching recreationally.

Phil J. Kastenholz
Phil J. Kastenholz

Director in Investment Strategy & Research, Partner

Phil joined Aspiriant as a Principal in 2010 as a result of the acquisition of Deloitte Investment Advisors. Phil has served as a member of the Investment Committee for Deloitte and Aspiriant. He has been providing high net worth individuals and families’ investment and wealth advisory services since 1999. Phil brings broad experience to client relationships including investment portfolio design, income tax consulting, and charitable and family wealth transfer planning.

Prior to joining Aspiriant, Phil worked at Deloitte Investment Advisors as a Senior Manager for the Milwaukee office since 2002. His career began in 1999 at the accounting firm Arthur Andersen LLP.

Phil received a Bachelor’s degree in accounting from Marquette University in 1999. He is a Certified Public Accountant (CPA), Chartered Financial Analyst (CFA) charterholder, and a Certified Financial PlannerTM professional (CFP®). He is a member of the AICPA and CFA Institute.

Phil and his wife, Bree, live in Franklin, WI with their three children. In his free time, he enjoys reading, coaching soccer, and spending time with his family. Phil and his family are members of St. Alphonsus Parish in Greendale. Phil serves on the Board of Directors and finance committee of the Milwaukee Kickers Soccer Club.

Stephen Kawasaki
Stephen Kawasaki

Senior Manager in Investment Strategy & Research, Partner

Stephen brings nearly a decade of investment management experience to his role as a Senior Manager in Investment Strategy & Research. Stephen works with his colleagues from our
Orange County office on asset allocation, investment strategy and manager selection decisions.

Prior to joining Aspiriant in 2016, Stephen was a member of the Investment Committee at Balasa Dinverno Foltz LLC, which manages assets primarily for individuals, families and institutional clients. In addition to investment strategy responsibilities, he provided investment and wealth advisory services to high net worth individuals and families.

Stephen earned a Bachelor of Science degree in Financial Planning with high honors from the University of Illinois, Urbana-Champaign. He holds the Chartered Financial Analyst® (CFA®), Chartered Alternative Investment Analyst (CAIA), and the Certified Financial PlannerTMTM (CFP®) designations. He is also a member of the CFA Institute and CAIA Association.

Stephen lives in Orange County with his family.


Aspirant is an investment adviser registered with the Securities and Exchange Commission (SEC), which does not suggest a certain level of skill and training. Additional information regarding Aspiriant and its advisory practices can be obtained via the following link: aspiriant.com.

Information contained herein is considered confidential, private and Aspiriant proprietary inside information that is intended only for the audience to which Aspiriant has knowingly distributed this presentation to, either by way of request or voluntarily. Any redistribution of this material without our prior express written permission is a violation of Aspirant’s privacy policy adopted to comport with various state and federal privacy laws that may subject any unauthorized distributor to legal action.

All opinions, figures, charts/graphs, estimates and data included in this document are as on date and are subject to change without notice. The statements contained herein may include statements of future expectations, for general market performance or economic conditions, and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Forecasts, projections and other forward-looking statements are based upon assumptions, current beliefs and expectations. Forward-looking statements are subject to numerous assumptions, estimates, risks and uncertainties, including but not limited to: economic, business, market and geopolitical conditions; U.S. and foreign regulatory developments relating to, among other things, financial institutions and markets, government oversight, fiscal and tax policy. Any forward-looking information should not be regarded as a representation by Aspiriant or any other person that estimates or expectations contemplated will be achieved, as the future is not predictable.


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