We already have a major international incident three days into 2026 as the Trump administration captures Venezuelan President Maduro and changes dynamics in the southern hemisphere.
But I’m not going to jump into the new year just yet. Instead, I want to take a moment to review the major fiscal policy decisions from 2025 that had the most effect on the markets.
President Trump introduced a flat 10% baseline tariff on imports and country-specific tariffs in April. This move caused immediate market reactions, with both the Dow Jones Industrial Average and the S&P 500 plummeting after the announcement.
The decision to pause tariffs for some countries, just days later, created additional confusion. Markets began to recover, even as the baseline tariffs and higher tariffs remained. Trade-deficit partners such as Canada, India, Brazil, and China, continue to experience elevated costs.
While the S&P rallied over the six-months after the pause, actual economic growth has slowed.
The U.S. GDP contracted by 0.6% in the first quarter of the year, in part because of the tariff policies and investor uncertainty about the US. However, this appeared to recover in the next few quarters, although investments continued to drag.
The overall inflation rate has thankfully stabilized at just under 3%, even as affordability continues to plague Americans. Over half said in a survey that they felt the cost of living rose in 2025. This may be due to specific price surges on stables like coffee, beef, and housing.
In an attempt to stimulate the economy, the Federal Reserve has begun cutting interest rates. The current range encompasses 3.50%-3.75%. While the stepped approach hasn’t significantly affected mortgage rates or auto loans, it signals potential relief.
Callan releases a periodic table of investment returns monthly and annually, organized from best to worst in a periodic table format. The full 2025 table won’t be released for another few months, but we can see a clear trend from January through September: Emerging Markets gained in value.
This asset class has been gradually climbing the ranks since 2022. While it dropped towards the bottom of the chart twice during the year, it finished September with a whopping 27.53% returns. U.S. fixed income assets, meanwhile, sunk to the bottom.
This much is clear: We’re seeing a dramatic adjustment in inflation, interest rates, and investing. There are so many variables in the economy and markets, let alone individual portfolios, it’s impossible to give specific recommendations. However, the volatility suggests that it’s more important than ever to rely on diversification and emergency funds.
It is essential to ensure that your investments are varied and diversified. This is a best practice in investing, and I’ve rarely seen it not be effective for mitigating risk. With so many variables in the current economy and shifting fiscal policy, it’s important to ensure your portfolio value is protected.
One particular aspect of diversification I want to highlight is geography. Let me explain.
I’ve been “riding the train” of the current administration. One element that has been beneficial is creating a portfolio that is exclusively non-US assets. This approach has allowed me to diversify portfolios and mitigate the effects of US-based uncertainty. This is not a recommendation, but one example of diversification.
With so many uncertainties in the economy, you want access to cash. Outside of taking out your minimum payments, you’ll want to have an emergency fund in place. What could this look like? Here are some best practices for building a resilient emergency fund:
There’s a lot of noise out there about how to invest. The truth is: No one knows the best path for you until they see the specifics of your goals and your portfolio. However, you can gain clarity from expert insights.
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