President Trump’s Tariffs and Single Stock Risk

The recent implementation of President Trump's "Liberation Day" tariffs has sent shockwaves through global financial markets, leading to significant decreases across all the major indices. On 4/3/25, the S&P 500 plummeted 4.8% and the Nasdaq Composite declined nearly 6%. Today, on 4/4/25, markets are again dropping with the S&P 500 down almost 5% intraday and Nasdaq down 5.5%. Investors are concerned about the escalating trade tensions and the potential for a global recession, not to mention the impact on inflation and consumer spending which makes up the bulk of the US economy.

A big part of the market are the Magnificent Seven, including stocks like Apple, Amazon, Google, etc. All these companies are big employers here in the Bay Area which means many people who live here own an outsized share of their portfolio in these single stocks as a result of employment and compensation. This market volatility, driven by US government and presidential actions, underscores the importance of diversification in investment portfolios. By spreading investments across various sectors and asset classes and trying to minimize exposure to a single stock or two will help soften the blow of these big market moves in the wrong direction. Nothing worse than negotiating a settlement with your soon to be ex-spouse only to see your investment portfolio crumble while you negotiate buyouts of houses, spousal support, and other assets. Not to mention the impact of the value of those recently issues stock awards on future compensation and the resulting child and spousal support.