new tariff in town
Beginning with the “Liberation Day” press conference on April 2nd, the tariff shock moved into high gear in April with the S&P 500 tumbling nearly 12% in just four trading days from April 3rd to April 8th amid crisis conditions that began to infect credit markets in a pattern resembling the early phases of the COVID Crisis in 2020.
S&P 500 TR, 11/4/24 - 4/30/25. Source: barchart.com. Click for larger image
Like many other crisis periods, it was credit market stress that ultimately prompted a policy reaction, this time in the form of a 90 day tariff “pause” on April 9th that stabilized markets by reviving hope in tariffs as merely a temporary bargaining tactic. Whether or not this turns out to be true, confidence in US assets has been shaken (MSCI EAFE +11.6% vs S&P 500 -4.9% YTD) and even assuming new trade deals, lingering economic uncertainty could weigh on growth for some time. With port volumes collapsing, earnings revisions turning negative and recession odds nearing 66% in some prediction markets, the die may have already been cast.
Under April’s crisis conditions, tactical hedging proved effective with defensive positions producing approximately 8% relative performance for TCM's Risk-Managed Equity strategies during the intense declines to April 8th, enabling profitable outcomes as equities regained composure into month end and capping a clean demonstration of the value of tactical risk management in the period since the last S&P 500 correction in November 2023 (chart).
Cumulative returns by market phase, 11/1/23 - 4/30/25. Source: TCM, barchart.com. Click for larger image
By pursuing up / down capture asymmetry rather than constant “hedging”, TCM Risk-Managed Equity strategies have been able to capture nearly all of the market’s return over this period with less risk than unhedged exposure, significantly outperforming other hedged equity peers* in the process. No investment strategy is perfect but in the hedged equity universe, TCM’s unique approach has often stood out.
In a diversified portfolio, this type of stabilizing exposure can be especially valuable during turbulent markets, making it easier to “buy the dip” in other risk assets that may be available for only a short time. Proving this concept out, Legacy Navigator achieved its best month since inception in April, gaining 9.5% on the month as Tactical Beta, Tactical Q and Alpha Seeker exposures preserved capital and enabled an increase in the strategy’s other holdings.
It has been said that there are “decades where nothing happens and there are weeks where decades happen”. This is especially true in markets and while April 2025 didn’t exactly change the course of decades, it serves as a good reminder of the risks and opportunities presented by sudden dislocations. Often coming with little warning and from unexpected sources, investors would be well advised to have a plan for navigating them.
*Tactical Beta vs an equal-weight composite of JPM Hedged Eq (JHEQX), Swan Def Risk (SDRIX) and Gateway Fd A (GATEX). Tactical Beta’s 1, 3, and 5 year returns are available here.