You’ve seen this movie before:
A policy shock hits, the market swings, and the first question clients ask is “What does this mean for my portfolio?” You then give your obligatory read while reassuring them that you’re watching it closely.
What you don’t say out loud is that explaining what happened is not all that complex; deciding what to do next is the hard part.
As a result, most portfolios are still positioned for the pre-tariff world. That means they’re holding companies whose supply chains are about to get more expensive, whose margins are set to narrow, and whose growth assumptions may already be out of reach.
Since President Donald Trump announced his reciprocal trade tariffs on April 2, 2025, markets have swung wildly in response to the tariff threats and counter-threats. The S&P 500 fell 4.8% on April 3, marking its worst day since June 2020, followed by another fall on April 4 to bring the two-day return to -10.5%. On April 9, however, the index surged 9.5% when the White House announced a 90-day pause on the broader tariff rollout.
This rollercoaster ride that investors have had to endure is likely to only get wilder as the full impact of the tariffs are felt in the economy, households, and corporate profits.
The challenge is that neither traditional stock picking nor a fully passive approach allows you to step aside before the damage has been done. That’s exactly the gap the NAA Allocation Index was built to close by acting when conditions change, not when the losses are already booked.
What is the NAA Allocation Index?
The New Age Alpha Allocation Index is part of the index family offered by New Age Alpha, LLC. It employs a transparent, rules-based methodology to allocate investments based on changing market conditions.
Funds are allocated across the New Age Alpha U.S. Large-Cap Core Index, the New Age Alpha USD High Yield Index, the iBoxx USD Liquid Investment Grade Index, and a cash equivalent component represented by the S&P US 2 Year Treasury Index.
By combining these components within a disciplined framework, the index is designed to adapt to changing market conditions. It applies the same rules-based discipline we use in stock selection to the asset allocation decisions, removing subjectivity and speculation.
The allocation can move along the risk spectrum – from an 80% equities / 20% fixed income stance, to a slightly defensive 60/40 position, or a fully defensive cash allocation – depending on the indicators at each rebalance.
The April test
When the US trade tariffs were first announced, the NAA Allocation Index did exactly what it was designed to do.
Our indicators had picked up a material shift in the market’s risk profile. Within its rules-based monthly review, the index reduced equity exposure and moved into a more defensive posture by shifting allocation to fixed income assets.
This wasn’t about guessing which industries would be hit hardest or timing the market’s next move. It was about recognizing that conditions had changed, and reacting decisively following a disciplined, repeatable process.
And the NAA Allocation Index delivered: on March 24, the Index derisked from an 80/20 equity: fixed income exposure to 60/40, and remained at this level until June 23 when it returned to 80/20.
The impact was clear. Between March 24 and April 8, our Index fell 9.03% compared to the S&P 500’s 13.57% drop over the same period. Since moving back to the 80:20 allocation, the NAA Allocation Index has gained 4.99%, compared with 6.34% for the S&P 500.
This gap is to be expected: unlike the S&P 500, which is comprised solely of equities, our index maintains an allocation to fixed income or cash as determined by the model. Growth in our index therefore tends to lag the S&P 500 during sharp rallies, but it shows its real value when the opposite is true.
How NAA Allocation Index adjusts to changing conditions
NAA Allocation Index is a multi-asset index designed to allocate dynamically across equities, bonds, and cash.
It incorporates multiple forward-looking signals:
- Leading Economic Index (LEI)
- Market volatility (VIX)
- Momentum and Fed policy changes
When these indicators signal rising risk, the index reduces equity exposure and reallocates to fixed income or even cash in some cases.
The equity portion of NAA Allocation Index tracks the NAA Large-Cap Core Index – a 100-stock portfolio drawn from the S&P 500 using New Age Alpha’s h-factor methodology.
Our proprietary methodology measures the probability that a company will fail to deliver the revenue growth indicated by its stock price. The result is diversified large-cap exposure across styles and sectors, but without the names most at risk of disappointing.
When forward-looking indicators flag rising risk, the model reduces exposure to this equity sleeve and reallocates to bonds or cash-like assets.
As the changes in asset allocation are driven by our rules-based system, it isn’t about timing the market. It is about removing mispriced risk before it becomes a problem.
Why this moment matters
The latest tariffs aren’t noise, they’re reshaping the economics of entire industries. Rising costs are flowing through supply chains and competitive advantages are shifting in dramatic ways.
Sectors that have relied on low-cost imports will see margins compress, while exporters face new barriers. Some companies, no matter how strong their brand, will struggle to deliver the growth their share price demands.
What we’ve seen so far is the market adjusting to a headline. What comes next could be far more painful.
Although we’re not in the business of forecasting the future, looking at this estimate from Yale’s Budget Lab1 suggest the combination of newly implemented tariffs and anticipated foreign retaliation could wipe out up to $120 billion in annual US economic output.
The same report projects that unemployment rate could rise 0.3 percentage points by the end of 2025 – equating to nearly 500,000 fewer jobs, and 0.7 percentage point by the end of 2026.
These aren’t wild projections. They reflect the real drag of supply chain disruptions, higher input costs, and shrinking global demand for US goods.
We’ve seen this before
Financial advisors who’ve been around long enough will remember the moments when markets turned sharply. In 2008, cracks in the credit market cascaded into a full-scale financial crisis. Bear Stearns collapsed. Lehman Brothers disappeared. Washington Mutual and Wachovia folded.
In 2020, the unexpected global shutdown created the sharpest contraction – and recovery – in modern history. In 2022, rapid rate hikes blindsided investors who’d grown used to low inflation and interest rates.
In every case, portfolios that failed to adapt quickly suffered the deepest damage.
The New Age Alpha Allocation Index’s systematic approach has shown strong defensive characteristics during periods of market stress:
Market event
2008 financial crisis2020 COVID crash2022 rate hike shockTypical 60/40 response
Deep equity drawdownDouble-digit losses in weeksEquities and bonds fell togetherAllocation Index response
Shifted defensively into cashReacted early based on rising risk signalsShifted to higher-quality assets to limit loss
These shifts weren’t the result of forecasts. They were based on systematic responses to measurable signals.
What this means for you
When clients ask what you’re doing about tariffs, you need an answer that is credible and explainable. The NAA Allocation Index gives you that answer.
Tariffs will keep reshaping the playing field. Margins, supply chains, and competitive positions will continue to shift.
Positioning for that change now – with a process that adapts to new realities without chasing stories – is how we believe you protect portfolios and the trust your clients place in you.
¹Yale Budget Lab. The State of U.S. Tariffs. July 28, 2025.
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