Markets: Tariff Tantrum
The stock market attempts to rapidly adjust prices based upon incoming information.
Stocks ended last week, March 6, 2025, lower across the board in the United States.
One moment a tariff is imposed, altered hours later, postponed, and then suggested to start again with alterations. If, I mean if, this is just part of the negotiation process, I wish the rhetoric was kept behind closed doors until the direction is known.
The recent stock market volatility is justified based on the significant uncertainties visible. We can only hope when all is said and done, the US economy is stronger. For the time being, the uncertainty is impacting consumer attitudes as well as CEO concerns.
If you’re a CEO, do you continue to hire? Do you continue with your expansion/marketing plans? Do you borrow new money to build that new factory? Looking out long-term the answer is most likely yes, however why not wait a few months? Last week, retailing CEO’s suggested concerns about the cost of product and consumer attitudes.
The market is pricing in uncertainty. Last week ending March 6ᵗʰ, the Dow dropped (2.43%), the S&P 500 (3.03%), the Nasdaq (3.63%) and the Russell 2000 (3.79%).
Foreign stocks continue to outpace the US, rising 3.43% and emerging markets 2.85%. Will foreign stocks continue to lead the markets in 2025? Or is money flowing overseas temporarily?
Stock Correction?
A Stock market correction is typically defined as a drop of 10% from its peak.
The Nasdaq and the Russell 2000 are both down 10% or more. The S&P 500 is down 6.1% and the Dow 5%.
Pullbacks and corrections are normal and should be expected. When they occur, most people’s knee jerk reaction, “it’s different and worse this time”. It always feels uncomfortable to watch portfolios decline. When corrections are over, in the rear-view mirror, the trough of being uncomfortable is mostly forgotten.
This pullback/correction will also end. When? When it does! Most will guess incorrectly.
Government Shutdown & Inflation
Funding for federal agencies runs out on Friday March 14ᵗʰ. The House is expected to vote on a proposal this Tuesday. If the House passes the bill, it will still need 60 votes in the Senate, of which 53 are Republicans. Hopefully, we can avert a government shutdown as we have plenty of other issues front and center. With everything transpiring, it’s hard to imagine Democrats will be compromising.
Last year’s favorite word, inflation, creeps back into the news this week as we’ll hear the Consumer Price and the Producer Price Inflation reports. A lower than anticipated inflation number may be seen positive, as many will speculate the odds of the Fed decreasing rates may increase.
Forecasting the direction of inflation may prove illusive for the time being. Will tariffs increase inflation as many have suggested? Will business and consumers slow the current pace of spending, perhaps placing downward pressure on inflation?
We are hearing a ton of negativity. Often times, this means a market bottom is starting to form. Let’s hope a true correction is as far down as we go.
All data sourced from Wall Street Journal, March 6, 2025
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
