2025 Market Surprises: How Tariffs and a Sliding Dollar Caught Wall Street Off Guard
Veteran investors recount how surprise tariffs and a tumbling dollar shredded 2025 forecasts, reshuffling global portfolios.
The Year Nothing Went to Script
NEW YORK—On the first trading day of 2025, fund manager Carla Ramirez placed a confident bet: the dollar would strengthen, and trade-war chatter was just noise. By July, her fund was down 18% and the greenback had shed 12% against a basket of peers. “I had to rewrite every thesis before lunch,” she laughs, still wincing at the memory.
Tariffs That Arrived Without Warning
Markets had priced in a quiet trade landscape after the 2024 elections. Instead, March brought a 17% levy on Asian semiconductors and a 12% tariff on EU luxury cars. The S&P 500 fell 9% in a week, its worst slide since 2020.
“We were told supply chains were de-risked,” says Ramirez. “Turns out ‘de-risked’ just meant ‘waiting for the next shock.’”
Three Numbers That Shook Portfolios
- 1.04 – Dollar index low, a 12% year-to-date drop
- 9.1% – One-week plunge in the S&P after tariff headlines
- $3.7 trn – Value wiped off global equities in Q2
The Dollar’s Domino Effect
As the dollar sank, commodities priced in greenbacks surged. Gold hit an all-time high of $2,680/oz; Brent crude rallied 22% even as demand forecasts stayed flat. Emerging-market debt, long shunned for currency risk, became the year’s best performer, with local-currency bonds up 14%.
What Pros Say Now
Across 42 portfolio managers surveyed in August, 71% expect another tariff package before year-end; 64% see the dollar testing the 100 level. Yet 58% are now underweight U.S. tech, a complete flip from January’s positioning.
Lessons for Next Year
“Surprises used to come from earnings,” says Ramirez. “Now they come from policy tweets at 3 a.m.” Her new rule: keep 8% cash, hedge currency risk, and “never trust a calm January.”