In the wake of a significant market rout triggered by President Donald Trump's recent tariff policy implementation, the investment landscape has become highly volatile. Brian Rehling, the head of global fixed income strategy at wells fargo Investment Institute, offers crucial insights for investors navigating these choppy waters.

The stock markets has been in a downward spiral since last week when Trump signed the tariff policy. On Monday, stocks tumbled again. Concurrently, Treasury yields have been on a rollercoaster ride. After dropping late last week as investors flocked to the safety of Treasuries amid recession fears, yields started moving higher. It's important to note that yields and bond prices have an inverse relationship.

Fixed income assets, as Rehling points out, have indeed served as a haven during this market volatility. Times like these are why you have fixed income in your well - diversified portfolio and you are seeing gains on your fixed income side that smooth out losses, he explained. However, he also cautions that the window for moving into high - quality bonds may have narrowed. Given that bond prices have already increased, it's now a less opportune moment to enter this asset class. Moreover, accurately predicting the bottom of the current market rout is extremely challenging. As a result, Rehling suggests that investors scale back their exposure to intermediate - and long - term bonds in the face of such uncertainty.

Long - term investors should take a close look at their portfolio balances, which have likely been disrupted by the recent market turbulence. Rehling recommends rebalancing back to the target allocation. Rebalance back to your target allocation. By doing that you are selling fixed income and buying equities, he said. This approach of rebalancing can naturally enable investors to practice the age - old investment strategy of buying low and selling high. Additionally, he advises long - term investors to use the dollar - cost averaging method when re - entering the stock market and to avoid making hasty, drastic changes, as these could lead to costly mistakes.

Wells Fargo has a positive outlook on high - quality U.S. large - cap and mid - cap equities. In fact, the firm recently reallocated funds from bonds to mid - caps to capitalize on the recent stock market pullback. However, for investors whose portfolios are overly weighted with risky assets, Rehling suggests considering the sale of some of these assets and a shift into short - term bonds.

Wells Fargo anticipates that market volatility will persist throughout the first half of the year, followed by a moderate rebound in the second half. The bank has significantly adjusted its market forecasts. On Friday, it slashed its S&P 500 year - end target from 6,600 to 6,000 and also reduced its expectations for corporate earnings. Furthermore, the projected 10 - year Treasury yield at year - end has been revised downward. Wells Fargo now anticipates it will land between 4.25% and 4.75%, down from the earlier projection of 4.75% to 5.25%.

In a note to clients, Wells Fargo elaborated on the impact of tariffs. Our forecasts and targets now broadly anticipate downshifting U.S. economic growth and somewhat stronger inflation in 2025. The additional drag on growth comes partly from several idiosyncratic factors in January, but even more from the now broad - based menu of tariff increases, the bank stated. Tariffs are expected to put a damper on consumer spending and corporate profit margins while simultaneously driving up goods prices and overall consumer price inflation.