Trump’s tariff pause brings little relief as recession fears linger
Donald Trump’s move to postpone most of his new tariffs for 90 days seems to have brought only fleeting relief for markets. After a huge rally on April 10, April 11 saw Asian stocks head lower again.
- KPERS saw a small gain in Q1 2025 despite stock market volatility due to its diversified portfolio.
- Market volatility increased significantly in April due to tariff announcements, reaching levels comparable to the 2008 financial crisis and the COVID-19 pandemic.
- Experts predict continued market volatility until tariff issues are resolved, advising KPERS to maintain its long-term strategic asset allocation.
- KPERS’s diversified investments, including international equities, fixed income, real assets, and private equity, helped offset losses in the domestic market.
Diversification meant the Kansas Public Employees Retirement System “eked out a small gain” in the first quarter of 2025 despite volatility in the stock market.
KPERS administers retirement plans for government employees. Its investment portfolio has nearly $28 billion in total assets.
“April was a quite volatile month,” said KPERS chief investment officer Bruce Fink at a May 15 investment committee meeting.
“You recall that in mid April, after the announcement of the tariff regime, U.S. equities declined approximately 15% from their opening level at the beginning of the year. The S&P 500 was down about 15% year to date as of April 8. Since then, the U.S. equity market has rebounded and has reclaimed the beginning of the year levels. So a lot of volatility kind of ending up pretty much in the same place as where the year started.”
Volatility indicators rose to a level nearing that of the Global Financial Crisis and the COVID-19 pandemic, Aysun Kilic, a consultant and portfolio strategist at Meketa Investment Group, told the KPERS Board of Trustees on May 16.
KPERS board chair Jim Zakoura asked whether the volatility is likely to continue the rest of the year.
“Expect increased levels of volatility, particularly until the tariffs are resolved,” Kilic said.
She said while “hopefully the worst is over, it’s hard to predict” due to the combination of trade wars, monetary policy questions, fiscal spending and geopolitical concerns.
“It’s important to be aware of the news and it’s good to keep a pulse on the markets — markets are ever dynamic with a lot of volatility — but especially in your roles,” Kilic said. “You have approved a well thought, well processed strategic asset allocation just last year, which is designed for a long term. In these times, it’s even particularly important to keep with your strategic asset allocation and keep the diversification.”
Deputy chief investment officer Michael Cummings said the performance in the first quarter shows “the benefits of diversification.” While U.S. markets were down about 5% in the first quarter, the total KPERS portfolio “eked out a small gain, and that’s due to gains in just about every other category.”
Of KPERS’s nearly $28 billion in total assets, about 25% is invested in domestic equities. About 23% is in international equities, with 14% in core fixed income, 10% in non-core fixed income, 5% in real assets, 10% in real estate, 10% in private equity and 3% in cash or cash equivalents.
“Total fund performance here was positive two-tenths of a percent year to date as of March,” Cummings said. “In April, our preliminary estimate is a gain of about nine-tenths of a percent. We lost a little bit relative to the policy benchmark, but still had a nice gain. May, absolute return has definitely improved from there as U.S. markets have rallied.”
Ron Temple, the chief market strategist at Lazard, told the investment committee that lingering uncertainty on tariffs is bad for business.
“One of the worst things for economic growth is uncertainty,” Temple said. “Companies don’t make capital commitments when they don’t know what the rules are going to be. That’s one other place where I would caution anyone.
“When I look at the U.S. equity market today and how much it’s rallied — we’re only down 4% from the all time high — that doesn’t make a lot of sense to me. … The market is pretending it’s all over. Well, this is nowhere near over.”
Jason Alatidd is a Statehouse reporter for The Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X @Jason_Alatidd.
