*

Flexibility in deadlines, portfolio resiliency among key

takeaways

*

Investors worry about market complacency, underestimating

tariff

impact on earnings

*

August 1 now looms as deadline that could bring market

choppiness

By Lewis Krauskopf, Saqib Iqbal Ahmed and Laura Matthews

NEW YORK, July 8 (Reuters) - Three months after

President Donald Trump's sweeping global tariffs led markets to

plunge and then rebound ferociously, investors are grappling

with the fallout from the still-shifting trade backdrop and

adjusting strategies to withstand sudden policy shifts.

Among the lessons for investors from Trump's "Liberation

Day" tariff announcement on April 2, and the developments since

then: Brace for surprises from the Trump administration and be

flexible. Pay attention to trade as you would monetary and

fiscal policy. Don't over-react to headlines -- but also make

your portfolios as resilient as possible to tariff news.

"We're used to just thinking in terms of fiscal and

monetary, but now trade policy is almost like this third leg of

government policy and how it affects the economy," said Michael

Reynolds, vice president of investment strategy at Glenmede.

Investors had been laser-focused on Wednesday, which marked the

end of a 90-day pause Trump has placed on many of the most

severe "reciprocal" tariffs he had imposed in April on trading

partners. The White House on Monday delayed the start of tariffs

to August 1, while telling 14 nations that they would face

levies ranging from 25% for countries including Japan and South

Korea, to 40% for Laos and Myanmar.

"Investors, and the market more broadly, are used to literal

interpretations of announcements and what we're realizing with

the Trump administration is that is dangerous because there is

often flexibility ultimately in the end result," said Mark

Hackett, chief market strategist at Nationwide. "We've learned

over the last three months there is flexibility."

Stocks tumbled in the days following the "Liberation Day"

announcement, with the S&P 500 falling to the brink of a

bear market. Stock and bond volatility spiked, with the daily

equity index swings among the most severe since the onset of the

coronavirus pandemic in early 2020.

But stocks began climbing back following Trump's pause. A

U.S. deal with the U.K. and a truce with China kept the market's

momentum going. Volatility measures moderated significantly as

well, with the Cboe Volatility index, Wall Street's "fear

gauge", falling to its long-term median level.

Helped by a better-than-feared first-quarter earnings season

and economic data, the S&P 500 on June 27 hit a record high for

the first time in over four months. The benchmark index is now

up about 6% for the year.

"Uncertainty at Liberation Day was very open-ended,"

Reynolds said. "But the outline of a couple of these initial

trade deals have kind of narrowed the field of what's probable

on tariffs... The fact that we don't have this open-ended risk

where tariffs could go anywhere I think is pretty constructive."

Even so, he said, the rebound has been "so swift and large

in magnitude that it wouldn't surprise us to see a near-term

pullback."

Stocks are not fully factoring in the negative impact to

earnings from tariffs that are already in place while investors

may be overly optimistic that trade deals will be completed,

said Kristina Hooper, chief market strategist at Man Group.

"I'm not convinced that all the pieces are there for the

stock market to be as positive as it is," Hooper said.

One lesson from the past few months, Hooper said, is the

potential for tariffs to "come out of left field." She pointed

to Trump's threat this week that countries aligning themselves

with the "Anti-American policies" of the BRICS bloc will be

charged an additional 10% tariff.

"What I've learned is to expect to be surprised," Hooper

said.

Some investors have referred to the acronym "TACO", or Trump

Always Chickens Out, as a rationale for why markets should not

fear the announcement of harsh tariffs because many believe they

will likely be moderated.

Heading into this week's initial tariff deadline, King Lip,

chief strategist at Baker Avenue Wealth Management, said that

market complacency was high and he expects more choppiness as

trade uncertainty rises again.

"The biggest risk for investors now is that there is no

pause after the trade deadlines and large tariffs are imposed by

the administration," Lip said.

While stocks have rebounded, the U.S. dollar has continued

to weaken since Liberation Day, sliding about 6% against a

basket of major currencies. Investors have trimmed exposure to

U.S. assets while also reassessing the greenback's status as the

world's reserve currency because of the uncertain policy

backdrop.

Gold, which tends to benefit as a safe-haven asset

during times of geopolitical uncertainty, has climbed 6% since

April 2 and is up 26% on the year.

Some investors have shifted strategies to manage through

tariff uncertainty.

Janus Henderson Investors has been paring back holdings in

some portfolios that could be more vulnerable to tariffs, such

as Japanese and European automakers and exporters with long

supply chains, said Julian McManus, portfolio manager at the

firm.

Meanwhile, the firm has been favoring service companies that

are removed from the crosshairs of the trade war, such as

digital services or online music streaming companies.

"We've been extending timelines and making portfolios more

resilient," McManus said. "It's just important to keep a cool

head and not get caught up in the day-to-day headlines that can

be unsettling."