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‘A little goes a long way’

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Katherine Dowling has an analogy that may be useful for investors thinking of buying cryptocurrency like bitcoin and wondering what amount is appropriate.

It’s “like cayenne pepper,” said Dowling, general counsel and chief compliance officer at Bitwise Asset Management, a crypto money manager. “A little goes a long way” in a portfolio, she explained earlier this month at Financial Advisor Magazine’s annual Invest in Women conference in West Palm Beach, Florida.

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Ivory Johnson, a certified financial planner and member of CNBC’s Financial Advisor Council, said the description is apt.

“The more volatile an asset class is, the less of it that you need,” said Johnson, who founded Delancey Wealth Management, based in Washington, D.C.

A 2% or 3% allocation is ‘more than enough’

Cryptocurrencies are digital assets, a category that should be considered an “alternative investment,” Johnson said.

Other types of alts may include private equity, hedge funds and venture capital, for example. Financial advisors generally consider them separate from traditional portfolio holdings like stocks, bonds and cash.

Allocating 2% or 3% of one’s investment portfolio to crypto is “more than enough,” Johnson said.

Let’s say an asset grows by 50% this year, and an investor holds a 1% position. That’s like having a 5% position in another asset that grew 10%, Johnson said.

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Whether investors buy in to crypto — and how much they hold — will depend on their tolerance and capacity for risk, Johnson said.

For example, long-term investors in their mid-20s can afford to take more risk because they have ample time to make up for losses. Such a person may be able to stomach substantial financial losses and may reasonably hold 5% to 7% of their portfolio in crypto, Johnson added.

However, that allocation would most likely not be appropriate for a 70-year-old investor who can’t afford to subject their nest egg to major losses, he said.

“Bitcoin and other cryptocurrencies are a very speculative investment and involves a high degree of risk,” investment strategists at Wells Fargo Advisors wrote in a note last year. “Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential total loss of their investment.”

Crypto is ‘an incredibly volatile asset’

Crypto prices have been on a wild ride lately.

Bitcoin, for example, surged to an all-time high earlier in March. It topped $73,000 at its peak, though it has since retreated to less than $69,000.

Bitcoin prices had collapsed heading into 2022, and shed about 64% that year to below $20,000. By comparison, the S&P 500 stock index lost 19.4%.

Prices have since quadrupled from their low point in November 2022, as of late Wednesday. They’ve soared more than 50% year to date, while the S&P 500 is up about 9%.

Bitcoin is about eight times as volatile as the S&P 500, Johnson wrote in a Journal of Financial Planning article in December 2022, citing data from the Digital Asset Council for Financial Professionals.

The Crypto Volatility Index was about six times higher than the CBOE Volatility Index as of Wednesday.

“It’s still an incredibly volatile asset,” Bitwise’s Dowling said. “It’s not for everybody.”

Investing in crypto became easier for many investors after the Securities and Exchange Commission approved a slew of spot bitcoin exchange-traded funds in January, in a first for the asset class.

Investors may wish to consider dollar-cost averaging into crypto, Johnson said. This entails buying a little bit at a time, until reaching one’s target allocation. Investors should also rebalance periodically to ensure big crypto profits or losses don’t tweak one’s target allocation over time, he said.

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Tariffs may raise much less than White House projects, economists say

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President Donald Trump speaks before signing executive orders in the Oval Office on March 6, 2025.

Alex Wong | Getty Images

President Donald Trump says that tariffs will make the U.S. “rich.” But those riches will likely be far less than the White House expects, economists said.

The ultimate sum could have big ramifications for the U.S. economy, the nation’s debt and legislative negotiations over a tax-cut package, economists said.

White House trade adviser Peter Navarro on Sunday estimated tariffs would raise about $600 billion a year and $6 trillion over a decade. Auto tariffs would add another $100 billion a year, he said on “Fox News Sunday.”

Navarro made the projection as the U.S. plans to announce more tariffs against U.S. trading partners on Wednesday.

Economists expect the Trump administration’s tariff policy would generate a much lower amount of revenue than Navarro claims. Some project the total revenue would be less than half.

Roughly $600 billion to $700 billion a year “is not even in the realm of possibility,” said Mark Zandi, chief economist at Moody’s. “If you get to $100 billion to $200 billion, you’ll be pretty lucky.”

The White House declined to respond to a request for comment from CNBC about tariff revenue.

The ‘mental math’ behind tariff revenue

There are big question marks over the scope of the tariffs, including details like amount, duration, and products and countries affected — all of which have a significant bearing on the revenue total.

The White House is considering a 20% tariff on most imports, The Washington Post reported on Tuesday. President Trump floated this idea on the campaign trail. The Trump administration may ultimately opt for a different policy, like country-by-country tariffs based on each nation’s respective trade and non-trade barriers.

But a 20% tariff rate seems to align with Navarro’s revenue projections, economists said.

The U.S. imported about $3.3 trillion of goods in 2024. Applying a 20% tariff rate to all these imports would yield about $660 billion of annual revenue.

“That is almost certainly the mental math Peter Navarro is doing — and that mental math skips some crucial steps,” said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist at the White House Council of Economic Advisers during the Biden administration.

Trade advisor to U.S. President Donald Trump Peter Navarro speaks to press outside of the White House on March 12, 2025 in Washington, DC. 

Kayla Bartkowski | Getty Images

That’s because an accurate revenue estimate must account for the many economic impacts of tariffs in the U.S. and around the world, economists said. Those effects combine to reduce revenue, they said.

A 20% broad tariff would raise about $250 billion a year (or $2.5 trillion over a decade) when taking those effects into account, according to Tedeschi, citing a Yale Budget Lab analysis published Monday.  

There are ways to raise larger sums — but they would involve higher tariff rates, economists said. For example, a 50% across-the-board tariff would raise about $780 billion per year, according to economists at the Peterson Institute for International Economics.

Even that is an optimistic assessment: It doesn’t account for lower U.S. economic growth due to retaliation or the negative growth effects from the tariffs themselves, they wrote.

Why revenue would be lower than expected

Tariffs generally raise prices for consumers. A 20% broad tariff would cost the average consumer $3,400 to $4,200 a year, according to the Yale Budget Lab.

Consumers would naturally buy fewer imported goods if they cost more, economists said. Lower demand means fewer imports and less tariff revenue from those imports, they said.

Tariffs are also expected to trigger “reduced economic activity,” said Robert McClelland, senior fellow at the Urban-Brookings Tax Policy Center.

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For example, U.S. companies that don’t pass tariff costs on to consumers via higher prices would likely see profits suffer (and their income taxes fall), economists said. Consumers might pull back on spending, further denting company profits and tax revenues, economists said. Companies that take a financial hit might lay off workers, they said.

Foreign nations are also expected to retaliate with their own tariffs on U.S. products, which would hurt companies that export products abroad. Other nations may experience an economic downturn, further reducing demand for U.S. products.

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“If you get a 20% tariff rate, you’re going to get a rip-roaring recession, and that will undermine your fiscal situation,” Zandi said.

There’s also likely to be a certain level of non-compliance with tariff policy, and carve-outs for certain countries, industries or products, economists said. For instance, when the White House levied tariffs on China in February, it indefinitely exempted “de minimis” imports valued at $800 or less.

The Trump administration might also funnel some tariff revenue to paying certain parties aggrieved by a trade war, economists said.

President Trump did that in his first term: The government sent $61 billion in “relief” payments to American farmers who faced retaliatory tariffs, which was nearly all (92%) of the tariff revenue on Chinese goods from 2018 to 2020, according to the Council on Foreign Relations.

The tariffs will also likely have a short life span, diluting their potential revenue impact, economists said. They’re being issued by executive order and could be undone easily, whether by President Trump or a future president, they said.

“There’s zero probability these tariffs will last for 10 years,” Zandi said. “If they last until next year I’d be very surprised.”

Why this matters

The Trump administration has signaled that tariffs “will be one of the top-tier ways they’ll try to offset the cost” of passing a package of tax cuts, Tedeschi said.

Extending a 2017 tax cut law signed by President Trump would cost $4.5 trillion over a decade, according to the Tax Foundation. Trump has also called for other tax breaks like no taxes on tips, overtime pay or Social Security benefits, and a tax deduction for auto loan interest for American made cars.

If tariffs don’t cover the full cost of such a package, then Republican lawmakers would have to find cuts elsewhere or increase the nation’s debt, economists said.

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Investors hope April 2 could bring some tariff clarity and relief. That may not happen

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Cliff Asness’s AQR multi-strategy hedge fund returns 9% in the first quarter during tough conditions

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Cliff Asness.

Chris Goodney | Bloomberg | Getty Images

AQR Capital Management’s multistrategy hedge fund beat the market with a 9% rally in the first quarter as Wall Street grappled with extreme volatility amid President Donald Trump’s uncertain tariff policy.

The Apex strategy from Cliff Asness’ firm, which combines stocks, macro and arbitrage trades and has $3 billion in assets under management, gained 3.4% in March, boosting its first-quarter performance, according to a person familiar with AQR’s returns who asked to be anonymous as the information is private.

AQR’s Delphi Long-Short Equity Strategy gained 9.7% in the first quarter, while its alternative trend-following offering Helix returned 3%, the person said.

AQR, whose assets under management reached $128 billion at the end of March, declined to comment.

The stock market just wrapped up a tumultuous quarter as Trump’s aggressive tariffs raised concerns about an severe economic slowdown and a re-acceleration of inflation. The S&P 500 dipped into correction territory in March after hitting a record in February.

For the quarter, the equity benchmark was down 4.6%, snapping a five-quarter win streak. The tech-heavy Nasdaq Composite lost 10.4% in the quarter, which would mark its biggest quarterly pullback since a 22.4% plunge in the second quarter of 2022.

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