Three weeks have passed since President Trump declared “Liberation Day” on April 2 and introduced a set of US tariffs, a move that has catalyzed a dramatic rethinking of risk, returns, and the structure of the global financial system. From an investing standpoint, the world has witnessed a shock of the magnitude that prompts rapid repricing across asset classes, currencies, and geographies. Markets are actively recalibrating expectations for economic activity, the behavior of financial assets, the direction of trade policy, and what should be considered safe havens in a markedly altered environment. With upheaval arriving at the door, it is reasonable to track the world’s major markets starting from the April 2 pivot date, because the prior global order now reads as a historical footnote, arguably obsolete in the face of what lies ahead. A chart capturing winners and losers through the close of April 21 outlines a distinct shift: gold has surged, government bonds in developed markets outside the United States have performed well, and even some emerging-market bonds have posted gains, while a broad swath of risk assets in the United States have retreated. Investors are confronting a new normal where traditional assumptions about how markets interact, how risk is priced, and which assets serve as safe havens are being rewritten.
The Liberation Day Pivot: What Changed and How Markets Responded
The emergence of a new world order, as framed by the April 2 events and the ensuing policy responses, marks a fundamental departure from long-standing presumptions about risk, diversification, and the interplay between monetary policy and fiscal actions. The initial reaction in financial markets has been swift and uneven, with asset classes moving to reflect a reassessment of risk premia, inflation pressures, and the probability of policy responses that may diverge from historical patterns. In this new context, several assets stand out as early leaders or laggards, illustrating the initial tilt of capital toward or away from perceived safety, liquidity, and growth potential.
On the performance front, the data through April 21 show a clear bifurcation between what investors previously considered risk-off havens and those assets that were more exposed to the underlying shifts in policy and trade dynamics. Gold, tracked by the GLD ETF, has been the standout performer, delivering a sizable rise of 9.7% so far. This trajectory underscores gold’s traditional role as a store of value and a hedge against inflationary expectations in a world where policy uncertainty and geopolitical concerns are elevated. Following gold, government bonds in developed markets outside the United States—captured by the BWX ETF—have climbed by 6.0%, marking a strong second-place performance for a segment widely viewed as a flight-to-safety instrument in times of stress or policy uncertainty. The trajectory of emerging-market government bonds, as represented by the EMLC ETF, has also been encouraging, with a 2.1% advance, signaling a cautious but positive repricing of risk within a segment that can offer diversification benefits in a shifting regime.
In the realm of alternative stores of value and yield, Bitcoin—the crypto asset tracked by the IBIT instrument—has logged a modest 0.6% gain, placing it in a more subdued position relative to gold and traditional fixed income. Cash, as proxied by the SHV ETF, which holds US Treasuries with maturities of one year or less, has inched up by 0.2%, suggesting a preference for liquidity and short-duration assets amid uncertain macro signals. On the downside, the most substantial declines have come from US equities, with the broad market proxy VTI losing 9.1% since Liberation Day, illustrating how a prolonged adjustment in US equities can press the risk-off sentiment and influence global asset allocations. Real estate investment trusts in the United States, represented by VNQ, have also faced meaningful selling pressure, consistent with a broader reassessment of growth-sensitive, cyclical assets that often correlate with rate expectations and growth outlooks. The US dollar, captured by UUP, has been a notable casualty among major reserve currencies, slipping as the appetite for dollar-denominated safety has ebbed in certain scenarios and as monetary policy expectations diverge globally. Even emerging-market equities—also tracked by EMLC in some contexts or by comparable proxies—have experienced pressure, reflecting the complexity of capital flows as investors reassess macro trajectories and potential policy tradeoffs.
This constellation of moves has led market participants to label the period as a “Great Financial Reset”—a phase in which the prior script for risk, reward, and safe havens is being rewritten in real time. The phrase captures the sense that the traditional hierarchy of asset classes is in flux: gold and certain government bonds are regaining prominence as anchors in a world of heightened policy risk, while equity markets, especially those tied to domestic growth narratives in the United States, are contending with a more challenging backdrop. Yet the durability and persistence of these shifts remain a matter of ongoing debate. At the moment, the underlying questions are less about whether the new regime is temporary and more about how long the reset will endure, whether it will become the defining framework going forward, and how different asset classes will perform under evolving trade policies, central-bank actions, and inflation dynamics.
The core takeaway from this initial period is not simply which assets rose or fell, but rather that the old assumptions about how markets interact are being unsettled. The entry point for many investors has shifted from asset allocation as a routine discipline to an active, highly nuanced exercise in reassessing risk premia, correlation structures, and the basic roles of diversification under a regime of rapid policy and geopolitical change. The presence of tariffs as a central policy lever, coupled with growing questions about the independence and credibility of the Federal Reserve in the aftermath of public scrutiny directed at the Fed Chairman, has added another layer of complexity to the pricing process. Market participants are forced to weigh potential inflationary spillovers against the risks of growth slowdown, all while recalibrating expectations for how central banks and governments will interact to steer the economy.
The Two Elephants in the Room: Tariffs, Policy, and the Fed Question
Two dominant forces sit at the center of the current market discourse. The first is the tariff policy that sparked the Liberation Day event and the broader trade-compression narrative that has taken hold in global markets. Tariffs are not merely about import prices; they also influence supply chains, corporate planning, and the distribution of risk across sectors and geographies. The second force is the debate surrounding the Federal Reserve’s independence, sharpened by public commentary and political pressure that has surrounded the Fed Chairman. This intersection of trade policy and monetary policy is producing a more uncertain macro environment, where the path of inflation and the pace of growth become more contingent on policy choices in Washington, D.C., and the behavior of counterparties in major economies around the world.
In this context, investors are left with critical macro questions that could determine the trajectory of the near term and the medium term. One crucial question is whether inflation will heat up, potentially accelerating faster than previously anticipated, and whether this trend could slow growth or even trigger a recession in the United States in the near term. A parallel line of inquiry concerns the sustainability of any inflationary impulse under a complicated global backdrop where tariff dynamics and supply-chain adjustments might exert persistent pressure on price levels, wages, and productivity. The answers to these macro questions will shape the configuration of risk premia across asset classes and inform strategic asset allocation decisions going forward. Market participants are weighing not only historical correlations and diversification benefits but also the possibility that the standard models of risk and return may break down or require substantial revision in response to the new regime.
As investors navigate these questions, a key insight remains that asset allocation continues to be the central, time-tested approach to managing risk in a world of persistent uncertainty. The fundamental logic is unchanged: there will always be winners and losers, and diversification across asset classes is designed to capture the asymmetries that arise from a dynamic macro landscape. Yet the Great Financial Reset adds a new dimension to this approach. It suggests that the assumptions about which assets are likely to outperform or underperform under a given policy mix cannot be taken for granted. In other words, the victors and losers are not written in stone; the evolving policy environment can redraw the map of relative performance in a relatively short span of time. Consequently, investors may need to adapt not only their long-term strategic allocations but also their tactical allocations as new information abounds and the implications of tariffs and policy independence unfold in real time.
Inflation, Growth, and Recession: The Macroeconomic Crosswinds
The macroeconomic landscape in the wake of Liberation Day features several crosswinds that are tough to forecast with high confidence. The central question remains whether inflation accelerates and whether growth slows to a pace that would hint at a recession in the near term. Tariffs act as a potential source of price pressure across a range of goods and services, especially for sectors that rely on imported inputs or global supply chains. If tariffs contribute to higher consumer prices, a shift in the inflation regime could influence expectations about monetary policy, the credibility of central banks, and the overall risk environment. On the other hand, if policymakers respond with targeted fiscal measures, structural reforms, or coordinated supply-side adjustments, the inflation impulse might be moderated, opening a different path for growth and asset performance.
A crucial aspect of this discussion is the degree to which inflation, should it intensify, translates into tighter financial conditions. Higher inflation can lead to higher real yields or, in some cases, more volatile inflation expectations that complicate the pricing of risk across asset classes. The interplay between inflation dynamics and growth prospects also has implications for recession risk. If inflation remains stubborn while growth wanes due to tariff-induced disruptions or other headwinds, the probability of a recession in the near term could rise. Conversely, if policy responses—whether through monetary accommodation, targeted fiscal support, or structural reforms—are effective in countering inflation without stalling growth, the macro scenario could remain relatively constructive for a broad set of assets, albeit with increased dispersion in performance across sectors and regions.
The Great Financial Reset narrative highlights that investors must consider a range of potential outcomes rather than rely on a single forecast. Scenarios that emphasize a shallow inflation episode with resilient growth could favor risk assets in the long run, while scenarios that realize a more persistent inflationary regime or a sharper economic slowdown could favor liquidity, high-quality government debt, and other defensive exposures. The key takeaway is that the path forward is uncertain, and the potential outcomes span a broad spectrum. In this environment, the discipline of diversification—spreading investments across asset classes with different sensitivities to inflation, growth, and policy changes—becomes even more essential. It is precisely this logic that has driven the observed performance split: assets perceived as hedges or safe havens have outperformed in a period of policy and trade uncertainty, while riskier assets that benefited from a more robust growth narrative have lagged or corrected, at least in the near term.
Asset Allocation as the Cornerstone of Risk Management
Across the evolving landscape, asset allocation remains the principal tool for managing risk and accommodating uncertainty. Even as the Great Financial Reset unsettles traditional correlations and risk premia, the underlying principle of diversification—spreading exposure across non-correlated assets to cushion shocks—continues to guide investor behavior. The performance data through April 21 illustrate how different asset classes respond to a shift in policy and trade expectations. Gold’s strong performance underscores the appeal of non-dollar-denominated stores of value during periods of heightened policy risk and inflation concerns. Government bonds outside the United States offer a meaningful cushion in a world where rate differentials, inflation expectations, and credit dynamics in various regions diverge. In contrast, US equities, which often benefit from a stable growth environment and supportive policy backdrop, have faced a sharper pullback, reflecting the re-pricing of risk under the new regime.
From a practical standpoint, investors can think about several core considerations when re-evaluating asset allocation in the wake of the Liberation Day shift. First, the role of gold as a hedge against policy risk and inflation pressure appears reinforced, suggesting a potential tilt toward precious metals in a diversified portfolio. Second, the resilience shown by international government bonds may reflect a flight-to-safety dynamic that remains relevant as geopolitical and policy uncertainties persist. Third, the continued attention to cash-like exposures that prioritize liquidity and short duration could be helpful in navigating volatile drawdowns and maintaining optionality for future rebalancing. Fourth, the underperformance of US equities relative to other assets highlights the importance of cross-border diversification in a world where domestic growth narratives can diverge from global risk premia and policy trajectories. These considerations collectively reinforce the case for a disciplined, rules-based approach to asset allocation that emphasizes risk parity, diversification, and a readiness to adjust as new information emerges.
It is also necessary to acknowledge the enduring challenge: markets price risk with imperfect foresight, and policy surprises, as well as the speed at which capital shifts can unfold, may compress risk premia in ways that are difficult to anticipate. In such environments, active monitoring, timely rebalancing, and robust risk controls are essential components of a sound investment process. Investors should remain mindful of the potential for whipsaw effects, where rapid movements in one asset class trigger spillovers into others, testing the resilience of diversified portfolios. The Great Financial Reset narrative makes it clear that the distribution of winners and losers may not adhere to historical norms, and that the success of asset allocation strategies will depend on the quality of the framework, the speed of interpretation of new data, and the discipline to execute plans even when sentiment turns volatile.
Stock Selection in a High-Volatility, Uncertain Market
The question many investors pose in this environment is whether there is a specific stock to buy “in your very next trade,” given the elevated uncertainty and the high level of macro risk. The response to this inquiry is shaped by the broader market dynamics described above: valuations in 2024 have moved higher, creating a sense of caution among investors who are wary of chasing returns in crowded markets. The prospect of volatile macro signals, policy surprises, and shifting risk premia makes stock picking more challenging than in more predictable cycles. Although some equities may demonstrate resilience or carry favorable secular trends, the overarching narrative remains that risk management and diversification are crucial. In a regime where the macro landscape can change abruptly, it is prudent to base stock-selection decisions on a structured framework that accounts for fundamental quality, balance-sheet strength, and sensitivity to macro developments, rather than relying solely on momentum or short-term catalysts.
Within this broader context, several considerations are relevant for equity investors. First, sectors that are sensitive to real rates, inflation expectations, and domestic demand dynamics may experience amplified volatility as policy expectations adjust. Second, international exposure—particularly to markets with divergent policy paths and growth profiles—can provide hedging against domestic shocks and help capture a broader spectrum of opportunities. Third, the dispersion in performance highlighted by the initial post-Liberation Day period emphasizes the value of rigorous screening processes and the avoidance of crowded trades, especially in environments where liquidity and sentiment can shift quickly. Fourth, a disciplined approach to position sizing, risk controls, and exit strategies remains essential to navigating sudden drawdowns or rapid shifts in macro expectations.
Any stock-picking framework in this context should also recognize the limits of short-term forecasts and the potential for surprises. It is useful to balance the search for growth with an emphasis on quality and cash-flow resilience, particularly in sectors and regions where the macro backdrop could exert sustained pressure. Investors might consider a blend of exposure to companies with solid balance sheets, diversified revenue streams, and the ability to withstand inflationary dynamics and tariff-related disruptions. The historical lesson is that in periods of elevated policy risk and uncertainty, a narrow focus on a handful of high-conviction bets can be riskier than a broad, diversified approach that emphasizes robust fundamentals, prudent leverage management, and sustainable competitive advantages.
The 2024 Valuation Landscape and What It Means for the Road Ahead
Valuations in 2024 have risen to levels that are generating a mix of optimism and caution among market participants. The increased affordability of risk for some asset classes, combined with the shifting landscape of policy and trade, requires a nuanced interpretation of price signals, earnings outlooks, and macro catalysts. In a world where the Great Financial Reset is reshaping the expected paths for inflation and growth, investors are compelled to scrutinize the balance between valuation levels and the probability of sustained earnings growth across different markets. The narrative around valuations is not monolithic; it varies by asset class, geography, and sector, reflecting a range of structural factors including policy regimes, currency dynamics, and global demand trends.
The practical implication for asset allocation is to adapt to this evolving valuation backdrop by maintaining a diversified, risk-aware approach that emphasizes high-quality exposures, defensible cash flows, and a balanced portfolio of inflation-sensitive and growth-oriented assets. This means recognizing that the relative attractiveness of assets can shift quickly in response to policy signals, geopolitical developments, and macro data releases. A disciplined framework that integrates scenario analysis, stress testing, and regular re-evaluation of risk premia can help investors navigate valuations without becoming overly attached to any one narrative. In a market environment characterized by rapid information flow and heightened sensitivity to policy commentary, the ability to translate macro insights into actionable asset allocation decisions is a critical differentiator for investors seeking to preserve capital while pursuing sustainable long-term returns.
Tracking the Market Through Key ETFs: A Closer Look at the Losers and Winners
To translate the evolving macro story into practical portfolio implications, many investors turn to exchange-traded funds (ETFs) as a transparent and accessible way to capture broad asset class exposures. The performance patterns observed since Liberation Day reflect the influence of macro drivers on these tracking instruments. Gold, as reflected by GLD, has been a standout performer, highlighting the metal’s established role as a hedge against policy risk and inflation concerns. The defensive posture in international government bonds, tracked by BWX, underscores a preference for higher-quality fixed income assets in a global context where rate differentials and currency movements can create relative value.
The performance of EMLC—an ETF focused on emerging-market government bonds—suggests that, in certain periods, investors are willing to accept credit and currency risk in exchange for the potential of diversification benefits and yield in a global yield-starved environment. Bitcoin, as represented by IBIT, claims a niche position in the hierarchy of assets during this phase, with a modest gain that signals cautious interest from a segment of investors who see digital assets as a new form of non-traditional store-of-value exposure. The cash proxy SHV indicates a preference for liquidity in short-duration Treasuries, a prudent stance during times of heightened uncertainty when capital preservation and flexibility become primary objectives. Conversely, US equities, as captured by VTI, have endured the most pronounced drawdown, signaling a reassessment of growth expectations in the face of tariff uncertainty and potential policy headwinds. Real estate investment trusts, or VNQ, have also faced selling pressure, aligning with a risk-off tilt among investors who are recalibrating their exposure to real estate and growth-sensitive assets.
The combined picture from these ETF movements illustrates a broader reallocation trend away from domestically oriented, growth-heavy equities toward assets that can provide ballast and hedging characteristics in a volatile macro environment. It also emphasizes the importance of understanding the mechanics of each ETF, including the underlying index composition, duration, currency exposure, and sector tilt, to interpret performance in the context of the evolving policy and trade landscape. For investors, the practical takeaway is to use these instruments not as forecasts but as building blocks that reflect a strategic stance on risk and diversification, with the flexibility to adjust allocations as new data arrives and as the policy environment continues to unfold.
The Next Steps: Practical Guidance for Investors in the New Regime
In a world where the old playbook is being rewritten, the prudent course for investors is to stay disciplined, remain diversified, and keep a clear eye on risk management. The Great Financial Reset implies that traditional assumptions about winners and losers are not fixed, so portfolio construction should prioritize resilience to a range of plausible outcomes. This includes maintaining exposure to inflation-hedging assets like gold, ensuring a meaningful allocation to high-quality fixed income, and preserving liquidity to navigate potential volatility and future rebalancing opportunities. Diversification across geographies and sectors helps to mitigate the idiosyncratic risks that can emerge when tariff policies, currency dynamics, and central-bank credibility are in flux.
Investment processes should emphasize ongoing monitoring of macro indicators such as inflation, growth rates, and policy statements, alongside a rigorous review of correlations and tail risks. Scenario analysis can be used to test how portfolios perform under different tariff trajectories, inflation paths, and growth outcomes. This approach supports informed decision-making about when to tilt toward defensive assets or opportunistic exposures and helps to ensure that the portfolio remains aligned with risk tolerance, time horizon, and liquidity requirements.
Ultimately, the path forward requires a careful balance between patience and responsiveness. While the market has begun to price in a new regime, it is essential to avoid overreacting to any single data point or policy development. The objective is to construct a resilient framework that can absorb shocks, capture opportunities as they arise, and adapt to the evolving landscape without compromising long-term financial goals. Investors should be prepared to adjust as the Great Financial Reset evolves, recognizing that today’s outperformers could shift in response to tomorrow’s policy decisions, and that a robust, diversified strategy is the most reliable tool for navigating this complex and rapidly changing environment.
The Narrative for 2024 and Beyond: Caution, Clarity, and Strategic Positioning
As 2024 has unfolded, valuations have risen, and market participants are left balancing enthusiasm for potentially continued earnings growth against the reality of higher risk premia and policy uncertainty. The narrative emerging from Liberation Day forward points to a market environment where the distribution of risk and reward is no longer as predictable as it once was. The emphasis on asset allocation as the anchor of investment strategy remains a central theme, but the specifics of how to implement that allocation require careful consideration of the ongoing macro dynamics, the tariff trajectory, currency movements, and the evolving credibility of policymaking institutions. The Great Financial Reset has recontextualized how investors perceive safety, growth, and the role of diversification in protecting capital while still pursuing reasonable returns.
In sum, the period since April 2 has been a transformative one for investors and markets alike. The interplay between policy changes, global trade considerations, macroeconomic impulses, and the behavior of various asset classes has produced a dynamic environment in which risk management and strategic diversification are more important than ever. While the path forward remains uncertain, the evidence to date reinforces the value of a disciplined approach that focuses on quality exposures, hedges against inflation and policy risk, and a robust framework for evaluating risk premia across a broad spectrum of assets.
Conclusion
The world has entered a phase described by many as a Great Financial Reset, catalyzed by the April 2 Liberation Day declaration and the accompanying tariff measures. The initial market response reveals a sharp split: gold and select government bonds have led the gains, while US equities and certain growth-oriented assets have faced meaningful declines. The core questions now revolve around how long this reset will persist, whether it signals a permanent shift in market dynamics, and how inflation and growth trajectories will evolve in a policy-rich global environment. Tariffs and questions about the Federal Reserve’s independence sit at the heart of the debate, shaping expectations for inflation, growth, and the pricing of risk across asset classes.
Asset allocation remains the central tool for navigating these shifts, offering a structured way to manage risk while seeking opportunities in a world where winners and losers may be redefined over time. As investors adjust to a regime where traditional relationships among assets—such as equities, bonds, and currencies—are no longer reliable anchors, a disciplined, diversified approach becomes more essential than ever. The data through April 21 illustrate the early effects of this new regime, but the ongoing evolution of policy, trade, and macro data will determine whether today’s leaders continue to outperform, whether new leaders emerge, or whether a broader realignment occurs across markets. In this context, the prudent investor will maintain a vigilant stance, continuously reassess risk exposure, and pursue a balanced, resilient strategy designed to endure the uncertainties that define the current era.
