As markets absorb tariff news, it’s a wake-up call for investors: experts

President Donald Trump’s new executive order issuing tariffs on goods entering the U.S. from Canada, China and Mexico sent markets falling early Monday.

By midday, the markets rebounded on news of a one-month pause on Mexico tariffs.

The events are a reminder that two forces drive the markets — underlying fundamentals and sentiment, according to Larry Adam, chief investment officer at Raymond James.

When it comes to fundamentals — the factors that determine a stock’s worth — there’s been no definitive change, Adam said.

But when it comes to sentiment, this may be a wake-up call for investors who came into the year thinking the threat of tariffs was not a realistic risk, he said.

“We’re not changing our forecast,” Adam said, which includes a year-end 6,375 target for the S&P 500. As of Monday afternoon, the index was hovering around 6,000.

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The total revenues companies in the S&P 500 receive from Canada and China and Mexico are fairly small, he said, with 1% coming from both Mexico and Canada, and 7% from China.

“It’s not as big to the S&P 500 as it is to the bigger economy,” Adam said of the tariffs’ effects.

For individual investors who are wondering what, if anything, to do next, “this is where the value of an advisor truly shines,” said Cathy Curtis, a certified financial planner and founder and CEO of Curtis Financial Planning, who is also a member of the CNBC FA Council.

“President Trump has consistently used tariffs as a negotiating tool, and we can expect this pattern to continue,” Curtis said she is telling clients.

Curtis said she’s urging clients to focus on the long-term gains they may see by staying the course, rather than overreact based on short-term headlines.

For individuals, the threat of tariffs has implications for both their investment portfolios and everyday household budgets.

Even in the face of sudden market volatility and uncertainty, financial advisors say it’s best not to make any sudden moves with your portfolio.

“Reacting to short-term news by trying to time the market is not a winning strategy,” Curtis said.

Still, sudden market volatility may be a wake-up call to some investment strategy adjustments that need to happen, advisors say.

That starts with a gut check to see whether you’re comfortable with your equity allocations in the event of steep losses.

Don’t invest more than you can handle financially or psychologically, CFP Carolyn McClanahan, founder of Life Planning Partners and a CNBC FA Council member, said she advises clients.

It is also important to be mindful of your portfolio’s international exposure, which could be affected by tariffs, said CFP Marguerita Cheng, CEO of Blue Ocean Global Wealth. Cheng is also a member of the CNBC FA Council.

Retirement savers ought to take a look at their target-date funds — investments that automatically adjust to an anticipated retirement date — to make sure they’re not exposed to more international investments than they want, Cheng said.

Current retirees should make sure they have enough money in cash and stable value fund to ensure they can fulfill their required minimum distributions and other immediate needs without having to sell their investments at an inopportune time, she said.

Consumer prices on everything from produce and liquor to medications and homes may increase with the implementation of tariffs. Consequently, consumer who have faced years of higher prices due to elevated inflation may now want to reassess their household budgets once again.

Meanwhile, Trump on Sunday said Americans could feel “pain” in the trade war.

“I think it’s highly likely that there will be some pain,” said Lee Baker, a CFP and president of Claris Financial Advisors.

To get ahead of those potential cost increases, it helps to evaluate how much you’re spending. Forgoing a vacation, extra items at the grocery store or additional trips in the car can help save money now in the event higher costs hit later, Baker said.  

“A little forethought in planning might help you avoid the sticker shock that could come from your grocery bill or particular items that are being threatened with tariffs,” said CFP Douglas Boneparth, president and founder of Bone Fide Wealth.

Baker and Boneparth are both members of the CNBC FA Council.