Maybe I’m wrong, but chances are you haven’t thought much lately about your tail. No worry, Federal Reserve Chairman Jay Powell has your back.

Now, the Fed head isn’t actually watching your posterior – at least we assume. And Powell’s tails aren’t the ones that wag, whip or curl. But they do have lots to do with your risk management plan for 2025 and beyond.

“Tail risk” is a term applied to the potential for large, and unexpected market moves, the focus of Powell’s comments toward the end of his press conference following release of the central bank’s latest statement on monetary policy Jan. 29.

Statistically speaking, tails are at either end of distribution curves. Fat middle sections account for around two-thirds of the market’s gyrations, flattening out to skinny ends, where more extreme moves are infrequent. This pattern shapes so-called normal curves like a bell.

But curves for traders are rarely normal, because, as Powell put it: “Uncertainty is with us all the time. It is human nature apparently to underestimate … how fat the tails are.”

In the economy, he said: “It's not a normal distribution. The tails are very fat, meaning things can happen way out of your expectations. It's never not that way.”

In other words, we should expect the unexpected – except we don’t. This tendency was confirmed just a few days later when the Trump Administration imposed new tariffs on imports: 25% from Canada and Mexico and 10% on China. The president said the duties are designed to stop the flow of illegal immigrants and fentanyl into the U.S. Critics, including some business interests, fear the tariffs could raise prices for consumers while lowering economic growth, producing “stagflation.” The White House acknowledged the strategy’s risks for the short term but said the benefits long-term were worth it.

Related:Trump tariffs bring economic uncertainty to farm country

Agriculture, of course, was in the crosshairs of the first trade war. A surge in government aid softened the fallout, but growers should again buckle up and brace for volatility.

Which country is next?

After Trump announced tariff targets over the weekend, is Europe next in line? But what if that huge, integrated market has its own cracks, deepened by leaders already borrowing elements of the president’s playbook, according to the European observers I heard minutes after Powell’s presser ended. So how do you keep score? Or even know who’s on first? Trading at the start of this week offers clues, and here are markets to watch to make the most of the muddle.

Interest rates were in focus last week, thanks to the Fed’s first of eight meetings scheduled for the year. As expected, the central bank made no change to its target range for benchmark Federal Funds, the proxy for short-term funding, keeping it at 4.25% to 4.5%.

Related:Economists rush to react to Trump’s moving tariff targets

Hitting the pause button didn’t freeze movements. Quite the contrary. While the U.S. held steady, other central banks did not. The European Central Bank cut its key rate to 2.75% amid signs of recession threatening Germany and France. But the Bank of Japan went the other way. After pushing zero rates for a decade, the BOJ has now inched to 0.25% to 0.5%, its highest level in 17 years.

U.S. interest rate futures range from one month to 30 year – take your pick, but the 10-year note is the most widely traded. While you likely wouldn’t use a 10-year loan to finance operating expenses, this contract provides a good overview of investor sentiment. Prices move in the opposite direction of yields. Losses on Friday reflected a rate of 4.54% toward one long end of the Treasury yield curve, which now shows a slight steepening. Just one year ago the curve was inverted. That is, short-term rates were higher than those for longer duration, a trend many feared was a signal of recession.

10-Year Note futures inched higher when trading resumed Sunday. Sometimes that buying reflects trader caution – the desire to park funds in a guaranteed asset, and Treasuries are still as good as it gets.

Parking dollars

Currencies are also a tool. Buying Treasuries as a safe haven requires money, specifically U.S. dollars, another market to watch. The easiest way to do this is with futures on indexes for the greenback, which are figured on different baskets of American trading partners. The index traded on the ICE exchange rallied Friday as a result of traders anticipating the Administration tariffs. Other currencies to watch are Canada’s loonie, the Mexican peso, Japan’s yen and China’s yuan.

A stronger dollar doesn’t directly doom U.S. ag markets for a couple reasons. First and foremost, importers also know how to hedge, using these trades to control currency risk. And remember that ag commodities are traded internationally in the local currency. So, there are Euro-denominated wheat contracts in the EU, just like Chicago uses dollars, and these prices create their own arbitrage.

Energy is another market to monitor. The Administration slapped a lower tariff on energy imports from Canada, much of which flows to the Midwest. Since that reprieve may only be temporary, crude futures rose Friday and opened stronger again Sunday.

Now what?

With the dollar index up and T-Notes down, the final financial market for U.S. traders was predictable. Stock markets eased Friday, and plunged Sunday evening when trading resumed, while the dollar index rallied and T-Notes fell, sending rates higher.

Who knows where these markets will settle today, or where they’re headed longer term. Instead, put the chaos to work. Growers with excess cash should pay particular attention – higher interest rates may not be here for long. The President’s desire for lower rates is hardly a secret, though accomplishing that goal may be difficult if fuel prices don’t cooperate.

Potash, as I wrote recently, could also be at risk because much of the supply comes from up north. And higher natural gas prices increase costs for nitrogen nutrients, not to mention charges for transporting anything.

Watch for plenty of Super Bowl snack angst too.  Guess where all those avocados for guacamole come from? Hint: It’s not Kansas City or Philadelphia.