Trading Places

This week saw the first big trade policy announcements from the White House and drove whiplash in markets. Although most investors expected tariffs to be a policy move early in the Trump administration, the size of the tariffs announced still rattled markets. The announcement was to impose a 25% tariff on both Canada and Mexico, and to increase the tariff on China by 10% – those three countries are our top three trading partners.

This came on the heels of the trade policy uncertainty index having peaked in November, falling a bit in December, then rebounding in January. All in all, uncertainty remains above the highs we saw in 2018-2019 when the last trade war was underway. Markets were already on edge.

But just before the tariffs went into effect, negotiations with Canada and Mexico led to them being delayed for one month. Chinese tariffs took effect as planned at midnight on Tuesday morning.

Despite the relief many are feeling in reaction to the one month delay, we do not think this story is over and investors should remain vigilant and prudent about taking risk in the industries most exposed to the rhetoric.

Given the U.S.’s reliance on imports from these three countries, it’s no wonder markets were rattled by the news. Imports make up 16% of U.S. GDP, and Canada, Mexico, and China account for over 40% of those imports. If we were to impose the proposed tariffs on all three countries, the cost of imported goods would likely rise, resulting in price increases on certain goods.

Markets then have to ask, how will those price increases be absorbed? Will consumers continue buying the same amount of goods & services, or will they adjust their behavior and make trade-offs? Likewise, will businesses try to reduce costs elsewhere to offset the increased input costs, or pass them through to consumers?

The market action on Monday, February 3, and Tuesday, February 4 suggests that investors saw the tariff threat as a threat to U.S. growth, meaning consumers and businesses would likely have to cut back in some areas in order to absorb the possible price hikes.

Trading Stocks

After the volatile Monday, the major stock indices recovered the next day, but not before investors felt like they’d been put through a pinball machine. The swings that took place across sectors were dramatic, and can be seen in the chart below.

The biggest sighs of relief came from the Energy, Communications, Tech, and Consumer Discretionary sectors. This gives us a first-look at which areas of the market are likely to be most sensitive to trade conflict with Canada and Mexico, and is something investors should keep in mind as the story unfolds.

Another way to read this chart more broadly is to say that Monday was a mostly risk-off environment with defensive sectors such as Utilities and Staples leading the way, while Tuesday was mostly risk-on and pro-growth with those same defensive sectors performing the worst.

That said, it’s important not to make long-term investment decisions based on what could be very short-term moves in markets.

Trading Carefully

Sometimes the best thing to do on days like Monday or Tuesday is not to trade at all. Case in point, the S&P 500 closed at 6,040 last Friday, January 31; despite all of the action during the first two trading days of this week, the index closed at 6,037 on Tuesday — a change of three points, which basically amounts to 0%.

Markets are still working through the digestion process, along with mega-cap tech earnings and other economic data. We are also coming up on the next jobs report this Friday, February 7, which will be closely watched.

Volatility will probably persist in these early weeks of the new administration as investors react to headlines and macro developments. The events of this week have not changed our conviction in our longer-term themes that can help markets look through short-term bumps: Liquidity is supportive, labor churn and wage pressure is low, inflation is in a better place than last year at this time, and sentiment is intact – albeit slightly bruised and sensitive. There are certainly risks that remain, but until or unless we have hard evidence of one of them materializing, we are optimistic that solid fundamentals can still support stocks.

Want more insights from Liz? The Important Part: Investing With Liz Thomas, a podcast from SoFi, takes listeners through today’s top-of-mind themes in investing and breaks them down into digestible and actionable pieces.

Photo Credit: iStock/SHansche

SoFi can’t guarantee future financial performance, and past performance is no indication of future success. This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.

Communication of SoFi Wealth LLC an SEC Registered Investment Adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov. Liz Young Thomas is a Registered Representative of SoFi Securities and Investment Advisor Representative of SoFi Wealth. Form ADV 2A is available at www.sofi.com/legal/adv.

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Claim is based on a series of randomized, blinded surveys conducted by a leading market research firm of twelve financial memberships (premium benefits programs accessible via subscription fee, minimum balance, or other qualification) across a wide breadth of financial offerings, including banking, borrowing, investing, and credit cards. A broad audit was conducted of competitors with premium memberships that offer benefits across the same categories as SoFi Plus (investing, banking, borrowing, spending, etc.), then focused on strongest (programs with best benefits) and most comparable (in terms of cost). A nationally representative sample of 900 consumers were asked to review unbranded offerings via two surveys:

1: A set of respondents reviewed all 12 unbranded financial memberships

2: 3 sets of respondents reviewed up to 5 unbranded financial memberships at a time, each time including SoFi Plus in the comparison set

The following unbranded programs and benefits were available for respondents to review:

Respondents were then asked to rank offerings based on the question “Which financial membership brand is most rewarding?” based on their interpretation of “financial membership” and “rewarding.”

Using both of the survey techniques described above, SoFi Plus received the highest rating for “rewarding” vs. the competition, exceeding the margin for error and reaching statistical significance at or above a 95% confidence level.

Results as of January 2025.

The tariffs are here.

On Saturday, President Donald Trump fulfilled a campaign promise, signing executive orders imposing 25% tariffs on imports from Canada and Mexico (with a partial exception for Canadian energy products) and a 10% tariff on Chinese goods.

Although Mexico and Canada have since negotiated monthlong delays on their start dates, you can’t understate the potential impact of these moves: Those three countries account for over 40% of products imported into the U.S.

The initial reactions from world leaders, the U.S. stock market, and the media were… not positive. Leaders from Canada, Mexico, and China expressed deep concerns. Major U.S. stock indexes fell. And for the second time in three days, the editorial board of the Wall Street Journal published a piece calling it “The Dumbest Trade War.”

With so much action on the tariffs front, we figured it was a good moment to refresh on some basics, starting with: What exactly is a tariff, anyway?

Simply put: It’s a tax imposed on imported goods — usually to protect local industries and raise revenue for the government that’s importing. It makes foreign products more expensive, which influences what people buy.

Though many economists doubt the efficacy of tariffs, conceptually, there are benefits. They give U.S. businesses that make the same goods a potential price advantage. They bring in revenue for the government to use for public services and projects.

And, as Trump has already demonstrated, they can be used as a bargaining chip in trade and political negotiations — encouraging companies to invest in the U.S., forcing them lower their own tariffs, or catalyzing change on border policy and enforcement.

On the other hand, when imported goods cost more, it limits product variety and availability (typically hitting lower-income consumers the hardest).

And other countries often respond to tariffs by imposing their own, which can lead to a trade war that damages both economies — and ultimately hurts consumers in both countries. (This appears to be the direction we’re headed in with China.) Plus, they can have a distorting effect on business. By protecting U.S. industries from competition, tariffs can make them less efficient and innovative in the long run.

So what? Though the U.S. government has deployed tariffs for decades, Trump’s strategy of ratcheting them up is unpopular among many economists, business leaders, and politicians, not to mention consumers. “Almost no one wants these tariffs — except Donald Trump,” Heather Long, a columnist at the Washington Post, said Friday. For now, it appears Trump’s approval is the only one that matters.

Related Reading

•   Trump Tariffs: Tracking the Economic Impact of the Trump Trade War (The Tax Foundation)

•   What Are Tariffs? (The Council on Foreign Relations)

•   The Tariff Announcement That Shocked Financial Markets (Bloomberg’s Odd Lots podcast)

photo credit: Kalyakan/Adobe Stock

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

In our efforts to bring you the latest updates on things that might impact your financial life, we may occasionally enter the political fray, covering candidates, bills, laws and more.

Please note: SoFi does not endorse or take official positions on any candidates and the bills they may be sponsoring or proposing. We may occasionally support legislation that we believe would be beneficial to our members, and will make sure to call it out when we do. Our reporting otherwise is for informational purposes only, and shouldn’t be construed as an endorsement.

SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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Losing a job is traumatic. It’s often very sudden, and can leave people feeling stunned and maybe even a bit panicked about whether they’ll be able to pay their bills.

Some people are told to leave their roles immediately; others are given notice. Either way, it’s normal to feel unprepared and stressed — and not know what to do next.

If you or someone you know gets laid off or fired, don’t let the shock keep you from making informed decisions. You’ll have important questions, and those questions deserve a thoughtful response. Store this info away (or bookmark the article) so that you’ll know what to do if the time comes.

Answers to Your Day-One Questions

How do I stay insured?

The insurance coverage you have through your employer may end on your last day of employment, or last through the end of the week or month. To stay insured, you’ll need to decide whether to sign up for COBRA coverage through your employer or get a new policy elsewhere.

COBRA, if it’s made available, allows you to keep your employer-based insurance plan, though it’s often more expensive than other options. Your monthly premiums can be double what you’re used to because you’ll probably be required to pay your employer’s share of the cost too, plus an administrative fee.

If you choose to get new coverage, you can either buy coverage on a government exchange (your state may have its own or use the Health Insurance Marketplace,) or, if you have a spouse with health insurance, get on their plan. (Losing your job makes you eligible to enroll in their plan — even if it’s not their employer’s normal open enrollment period.)

Marketplace plans (also called “Obamacare,” “ACA” or “exchange plans”) are sold online or via insurance agents, and in a range of options and premiums. Unlike COBRA, your household income may qualify you for discounted premiums known as premium tax credits.

When comparing your options, consider not only premiums, but your out-of-pocket costs as well as the breadth of coverage and doctors. Marketplace plans may not be as generous as your employer’s group plan, and could have fewer in-network doctors. And if you do decide to get a new plan, don’t forget that whatever you’ve previously spent toward this year’s deductible won’t apply. These amounts reset with a new plan.

You’ll also want to consider coverage gaps. You’ll get 60 days to decide on COBRA, and once you do, your coverage will be retroactive to your first day without your employer plan. With a marketplace plan, however, your coverage won’t start until the first day of the month after your employer plan ends.

What happens to the money in my HSA and FSA?

If you had a Health Savings Account (HSA) with your employer, the money in it is yours. You can keep your funds right where they are and use them when needed. Or, you can move the money to a new employer or consolidate them with any other HSA account you may have.

If you have a Flexible Spending Account (FSA), on the other hand, you can’t take any remaining funds with you. So if there’s time before your last day, use that money! Here’s a list of eligible expenses.

Are there other benefits I can take with me?

Not that often. Some life insurance or long-term care insurance plans are portable or convertible to individual plans, although the monthly premiums may be higher. Ask whether there’s any option to take these policies with you.

What happens to my 401(k)?

The money in your 401(k) or 403(b) is yours, unless you have employer contributions that haven’t vested yet. You can’t keep that portion.

As for what to do with your account, there are usually four main options (fewer if you have a smaller balance):

•  Keep the account and continue to oversee your investments as you did before. You just can’t contribute anymore.

•  Roll the funds into a new 401(k) or 403(b) plan if/when you get a new job that has one.

•  Open an IRA and roll the funds over. (If you’re rolling over into a Roth IRA, it could impact your taxes.)

•  Withdraw some or all of the funds, paying a 10% penalty (unless you are 55 or older) and income tax on the money. This is obviously not desirable, but it is an option if you need money.

Note: There can be penalties if you don’t roll the funds over directly into the new plan.

What’s owed to me?

While you won’t necessarily be entitled to compensation for unused vacation time, you should ask your HR department about it, rather than assuming they’ll tell you. And check that your final checks account for any bonuses or commissions owed to you.

Note: You’ll want to gather your final paystubs, any separation documents, and the contact details for the company’s HR and benefits coordinators before losing access to your employee platform. You will likely need them for unemployment claims or to qualify for new health insurance.

Will I get severance?

That’s up to your company. If there is severance, you might be able to negotiate certain details of your package.

Answers to Your Day-Two Questions

Can I file for unemployment?

If your layoff is a normal layoff (because of something out of your control,) you should qualify for unemployment insurance benefits. But you probably won’t qualify if you were let go due to performance issues or behavior.

(If your boss used a vague euphemism when delivering the bad news, ask your HR department to share documentation so you can determine where you stand.)

Either way, contact your state’s unemployment program ASAP to learn your state’s rules and hopefully get the ball rolling.

What are my options if I don’t have enough saved to pay my bills?

People don’t always realize that many government programs offer financial aid based on income, not assets. So even if you own your home or have a retirement account, check to see if you qualify for SNAP, rental assistance, or other aid — especially if you’ve been the only breadwinner in your household. It can help you keep the fridge full and lights on.

As soon as possible, take stock of your savings to determine how many months you could go without your paycheck. If your cushion is low, the first step is to omit any unnecessary extras in your living expenses. (Though you may want to preserve small, meaningful items if they improve your quality of life. In other words, goodbye happy-hour snacks and cocktails, hello coffee for the job hunt.)

And if you estimate a serious shortfall, consider contacting the lenders on your mortgage payment, credit cards, and other accounts. Late payments can significantly damage your credit score, but lenders will often offer some leeway if you ask for it.

Image: Bernie Pesko/SoFi

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

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