President Donald Trump’s promised “liberation day” of tariffs is here.
Wall Street is anticipating heightened volatility in the financial markets this week as the White House on Wednesday is expected to officially unveil its next round of import taxes, which the president claims will free the world’s largest economy from unfair foreign trade.
While the Trump administration has referred to April 2 as “liberation day,” some investors fear that a new sweeping round of tariffs could trigger a global trade war and a recession for the U.S. economy.
While the details of these tariffs — due out on Wednesday at 4 p.m. Eastern time — have been shrouded in mystery, two major options are believed to be on the table. One could be a flat tariff of up to 20% on all U.S. trading partners, according to a Wall Street Journal report over the weekend. The other is so-called reciprocal tariffs against countries that have their own existing duties on U.S. goods.
To be sure, investors will have to wait until markets reopen on Thursday morning to react to Trump’s latest tariff announcement. But MarketWatch spoke to portfolio managers and market analysts about their asset-allocation strategies with April 2 in mind — and how investors could navigate any resulting market volatility, depending on their risk tolerance and investment goals.
Defensive stocks tend to “remain stable” during broader stock-market turbulence, noted Jacob Falkencrone, global head of investment strategy at Saxo Bank — with companies in the consumer-staples, healthcare and utilities sectors viewed as defensive investing strategies that may help hedge portfolio risk.
The S&P 500’s consumer-staples, healthcare and utilities sectors were among the top performers among the large-cap index’s 11 sectors in the first quarter of 2025 — up 4.6%, 6.1% and 4.1%, respectively. Their returns outpaced the 4.6% decline for the S&P 500 in the same period, according to FactSet data.
Investors have also piled into U.S. government-debt markets, with rising tariff concerns sparking a flight to the relative safety of Treasurys. This week, the flight-to-safety trade into government debt sent the 10-year Treasury yield to below its 200-day moving average. The 10-year rate was trading at 4.156% on Tuesday afternoon, its lowest level since December, according to Dow Jones Market Data.
Gold is another example of a popular “safe-haven” asset. The most active gold futures contract on Tuesday finished lower for the first time in four sessions, with prices pulling back from the yellow metal’s latest record-high settlement set a day earlier. On Monday, gold prices ended March nearly 11% higher, with a gain of 19% in the first quarter, according to FactSet data.
“The tariff trade has centered on: short U.S. stocks, short the U.S. dollar, long U.S. bonds and long gold. We do not think that this will change in the short term,” said Kathleen Brooks, research director at XTB.
“Unless Trump’s bark is worse than his bite, the gold price may continue to move higher — but it could also take a knock if Trump hints at exemptions to his reciprocal tariff plan, or if he signals a U-turn is likely,” Brooks told MarketWatch on Tuesday.
Fears over stagflation — a toxic combination of sticky inflation and slow economic growth — have weighed on stock-market sentiment in recent weeks. Of course, a narrow-than-expected tariff approach from the Trump administration on Wednesday could certainly drive a recovery rally in risky assets and reignite investor optimism, said market analysts.
“If you are an investor who is looking for a growth portfolio — such as technology stocks, specifically the megacaps — we think there’s a lot of upside in this sector,” said Mark Malek, chief investment officer at Siebert Financial. “At this point, this is an opportunity to actually get in if you are a long-term-focused investor and could tolerate the volatility,” he told MarketWatch in a phone interview on Tuesday.
The Roundhill Magnificent Seven ETF — which holds Big Tech stocks including Apple Inc., Microsoft Corp., Google parent Alphabet Inc., Amazon.com Inc., Nvidia Corp., Tesla Inc. and Meta Platforms Inc.— tumbled nearly 16% in the first quarter of 2025, according to FactSet data.
Malek and his team also recommend financial stocks and growth-oriented healthcare companies for risk-neutral investors targeting portfolio growth.
It’s worth noting that while April 2 could mark a peak in the policy uncertainty that has rocked the stock market over the past two months, it’s entirely possible that Trump’s trade policies still remain unclear even after Wednesday, Malek noted.
“There’s a lot of talk about tomorrow being some sort of ‘clearing event’ where we’re going to suddenly have this clarity about what the administration’s policy is going to be,” he said. “But the challenge is that we don’t know how long those tariffs are going to last, and we don’t know if they’re going to change.”
For investors holding concentrated stock positions that they wish to maintain, Malek and his team suggest using options — particularly collars — to hedge against downside in stocks while staying invested.
A collar is an options strategy that involves buying a downside put and selling an upside call to protect against potential losses. It’s often used when investors are optimistic about a stock they own long term but worry about short-term volatility in the broader market.
“We typically turn away from that strategy, but for a larger account that is fearful of big drawdowns of between 25% to 30%, we would consider collar options,” Malek said. He added that the strategy often limits the potential upside for a security and carries extra costs, so “that’s not for everybody to consider.”
U.S. stocks finished mostly higher on Tuesday as investors digested a batch of economic updates showing a rapidly cooling economy. The Dow Jones Industrial Average ended nearly flat, while the S&P 500 rose 0.4% and the Nasdaq Composite advanced 0.9%, according to FactSet data.
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