Impact of Tariffs on Stock Market: Why We Let Price and Cycles Confirm the Trade, Not the News
- 1 day ago
- 6 min read
Markets opened lower today in response to the White House’s announcement of new tariffs, with many investors bracing for volatility. While this kind of headline often creates a knee-jerk reaction, Steve’s philosophy reminds us that it’s not the news that drives the market — it’s the cycles and price confirmation that truly matter.
The projected cycle structure has been pointing down since late February, and today’s tariff announcement is simply adding fuel to an already burning fire. This isn’t a new narrative — it’s a continuation of a larger, forecasted trend that was already underway. Rather than assuming today’s weakness is purely news-driven, disciplined traders are looking at the cyclical context and asking: “Was this decline already projected?” The answer, in this case, is yes.
Cycles Lead, News Follows
There’s a pattern we see often in the markets: price moves first, news explains it later. That’s because the market runs on anticipation, not reaction. Cycles begin to shift before the headlines catch up. Traders who understand this principle are already positioned before the rest of the market responds.
In this case, the long-term cycle began declining earlier this year. Intermediate cycles followed, with momentum visibly weakening throughout March. The Visualizer had already projected this downturn well before any mention of tariffs hit the headlines. So while others scramble to understand what the tariff impact might be, we already know what matters — the cycles are down.
It’s not unusual for the media to retroactively assign meaning to a move that was already in motion. What many call “market reactions” are often just narrative overlays placed on top of existing price behavior. That’s why we always start with cycle structure. If the trend is down, we prepare for continuation — not because of what the headlines say, but because of what the market has already been showing.
What Tariffs Actually Do — and Don’t Do
Let’s be clear: tariffs can have a meaningful impact on inflation, earnings, and consumer behavior. For example, a 25% tariff on imported vehicles means both foreign and domestic cars get more expensive. Why? Because U.S. automakers use many foreign parts, and without pressure from high-quality imports, they also gain pricing power.
Economists estimate U.S. car prices could rise between $4,000 to $15,000 per vehicle under these new policies. That means higher inflation, slower consumer spending, and potentially weaker earnings. And that’s just one sector. The effect cascades across household goods, steel, electronics, and food — impacting the entire economy.
Tariffs are also unpredictable in how they affect specific sectors. While they may help some domestic producers in theory, in practice, they often distort global supply chains. Companies may delay investment decisions, cut back on hiring, or even issue earnings warnings if margins become too compressed.
But here’s the truth: traders using Steve’s strategy aren’t trading the economic theory — they’re trading the actual price movement within a cycle framework. If the long-term and intermediate-term cycles are pointing lower, we’re defensive — regardless of whether the headlines are bullish or bearish.
How We Trade the Downside
With cycles aligned to the downside, there are two tactical strategies Steve recommends:
Cash: Sometimes the best position is no position. Cash protects capital, avoids emotional decision-making, and allows you to re-enter with clarity when the market turns. While it might feel like you’re “missing out,” being in cash is often the smartest play when markets are vulnerable.
Inverse ETFs: Tools like SH, SDS, or SQQQ are useful when we get confirmation that the downtrend is intact. That means:
Price must be above the 2/3 and 3/5 crossover averages on the inverse ETF.
The intermediate cycle must have already peaked.
We use tight stops because volatility is higher in down markets.
In many cases, inverse ETFs are used as a short-term hedge against unrealized long positions. For example, if you’re not ready to sell your broader portfolio but expect a 4–6 week decline, taking a short-term inverse ETF position can smooth returns and limit drawdown. But just like any position, it must be monitored and exited once the trend or timing shifts.
We’re not chasing headlines — we’re confirming with cycle direction, trend strength, and technical alignment. It’s the discipline of Steve’s “Three T’s” — Trend, Timing, and Technicals — that gives us a clear edge.
Managing downside risk isn’t about reacting emotionally or trading on impulse. It’s about aligning with the broader market structure and understanding when protection or tactical positioning makes the most sense. This is especially important when headlines, like tariff news, seem to shake confidence. But as we’ve seen, those headlines often act as a spark for something already building beneath the surface. When the cycles are aligned to the downside, that’s when tools like inverse ETFs — or simply moving to cash — become essential.
Check our post on Portfolio Risk Management: Avoiding Knee-Jerk Reactions to Tariff News and Letting Cycles Lead for more info.
Impact of Tariffs on Stock Market: Why the News Comes Second
Most traders will spend the next few days analyzing the tariff details: percentages, sector impact, international response. But none of that changes the fact that the cycles were already falling. The market didn’t react to tariffs — it used the news to do what it was already set up to do.
Cycles act as the context — they shape the environment. Headlines are often just excuses to push price in the direction that was already developing. That’s why we don’t trade based on emotion. We wait for price to confirm the trend that the cycles have already forecasted. And when everything lines up — we act. If it doesn’t, we sit on the sidelines and wait.
That approach takes discipline, but it’s the only one that consistently reduces risk and improves timing. Without it, traders risk getting pulled into whipsaws, faked out by temporary rallies, or burned by false breakdowns. Structure matters more than sentiment.
People Also Ask About the Impact of Tariffs on Stock Market
Do tariffs always cause the market to drop?
Not necessarily. The market’s reaction depends on the underlying cycle structure. If cycles are rising, tariff news might only trigger a minor pullback. If cycles are falling, like now, tariffs can accelerate a much deeper decline. The news is a catalyst — not the cause. This is why cycle context is more important than headlines.
How can traders use inverse ETFs during tariff-driven selloffs?
Inverse ETFs work best when the trend and timing are both aligned to the downside. Traders wait for confirmation — such as price staying above the 2/3 and 3/5 crossover averages — before entering. These tools help profit during declines but require active risk management and tight stops. They’re not long-term holdings but swing tools to ride short-term trend alignment.
What role do cycles play in trading headlines?
Cycles help traders anticipate trend direction. When a headline hits, traders with cycle context know whether to fade the news, trade it, or ignore it. That cycle-based perspective reduces guesswork and emotional trading. It’s how you trade with intention instead of reaction.
Are tariffs bad for long-term investors?
Tariffs can increase costs, reduce margins, and slow economic growth — which may pressure equities over time. But long-term impact also depends on the policy response, inflation trends, and broader economic cycles. That’s why we rely on price and cycles — not just economic theory. When in doubt, follow the market — not the macro noise.
Is sitting in cash a valid strategy during tariff uncertainty?
Absolutely. When cycles point down and volatility is high, sitting in cash can be the most disciplined move. It avoids drawdowns and gives you capital flexibility when a stronger setup appears. Cash is a position — and it’s often the most powerful one. In fact, many successful traders build long-term wealth by knowing when not to trade.
Resolution to the Problem
Today’s tariff announcement didn’t change our game plan — it confirmed it. With cycles still pointing lower, the market was already vulnerable. Tariffs simply pushed things forward. Rather than reacting with panic, we remain calm, stay in cash or inverse positions, and follow the trend with clear risk management.
We don’t need to guess what the market will do next. The cycle structure has already provided that guidance. This is how Steve teaches us to trade: aligned with cycles, guided by crossover confirmation, and immune to emotional traps. The news will always be noisy. The cycles will always be clearer.
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Conclusion
Headlines will always try to explain market moves after the fact. But those who trade with cycle alignment and confirmation already knew where we were headed. The impact of tariffs on the stock market may dominate the headlines today — but for us, the real story was in the charts weeks ago.
Stay patient, stay disciplined, and let the cycles lead the way.
Author, Steve Swanson