“The obvious rarely happens; the unexpected constantly occurs.”
-Jesse Livermore
Here’s what you need to know this week:
· Stocks continue to fall on trade war anxieties
· Markets look for signs of optimism
· The latest on tariffs
“Correction”
Stocks posted their worst day of the year on Monday on renewed fears of an all-out trade war. The loss has now erased all of the gains since Trump’s election in early November and the S&P 500 is flirting with a 10% decline from all-time highs. In Wall Street jargon a 10% decline is known as a “correction”; you may recall from last week that corrections are common in the market and occur 1.1 times per year on average:
Still, no one likes seeing their portfolio fall. This week, investors are looking to a handful of catalysts for signs of optimism.
Busy Week
There are a few macro currents outside of tariffs that may impact the financial markets. The first is the Consumer Price Index (CPI) report for February out later this morning. Analysts expect this report to show 0.3% monthly and 2.9% annualized inflation, down from 0.5% and 3.0% in January respectively[1]. The tariffs are unlikely to have impacted these numbers yet, but a surprise to the upside may add to market unease.
This CPI report comes one week before the next meeting of the Federal Open Market Committee (FOMC), the governing body of the Federal Reserve that determines interest rate policy. Investors still overwhelmingly expect the FOMC to hold interest rates steady, with the bond market currently pricing in a 97% chance of no change. However, markets were only pricing in one 0.25% interest rate cut for 2025 as recently as two weeks ago, but now the bond market is predicting three rate cuts this year[2]. These numbers clearly can swing rather quickly, but the rapid change in predicted cuts is another indicator that market participants expect economic weakness unless the trade war outlook changes.
Last is an impending potential government shutdown. The House of Representatives is preparing to vote on a continuing resolution that would fund the federal government for the next six months, but the bill must pass both the House and the Senate before this Friday or else the government will shut down. The votes are expected to be tight: Democrats so far have uniformly opposed the bill due to having no input in its drafting and the Republicans hold a razon-thin 218-214 majority. And of course the trade war still looms large in the background.
Latest on Tariffs
The tariff news over the last two weeks has changed extremely rapidly so this may be out of date by the time you read this. As of writing (Tuesday, March 11th at 3:00 PM CT) the Canadian province of Ontario agreed to suspend its imminent 25% tariff on electricity to a handful of northern states[3]. Ontario Premier Doug Ford had proposed these tariffs earlier this same day; in response, President Trump revoked his one-month pause of tariffs of Canadian aluminum and steel and also doubled the tariff from 25% to 50%.
However, Trump is currently reevaluating his stance in light of Ontario pausing their tariff, and there may be a new deal on the table by the time this newsletter goes out tomorrow. A soft CPI report may bolster investor confidence, but it’s clear that the potential trade war has overtaken inflation as the animating concern for investors this year.
What Else
· Ukraine says that it is ready to accept a US proposal for a 30-day truce with Russia
· President Trump has told Iran that he is open to renegotiating nuclear talks
· Greenland is holding a vote on whether to declare independence from Denmark
· Israel and Hamas continue to negotiate terms of a truce
· Mark Carney has succeeded Justin Trudeau as Prime Minister of Canada; a new general election is expected to be called soon
· March Madness Selection Sunday is this Sunday, March 16th
What We’re Reading
Tomorrow will bring the first full lunar eclipse in three years. The “blood worm moon”, so-called because of its reddish hue, will reach the path of totality at roughly 1:15 AM CT on Friday morning and will last for about 65 minutes. Click below to read more about the eclipse and best viewing tips:
What’s Happening Downtown
The Myriad Gardens is hosting Sham-ROCK the Gardens next Monday, March 17th. This event runs from 11:00 AM to 2:00 PM and will feature live Irish musicians to celebrate Saint Paddy’s Day, as well as food trucks and vendors. Click below to learn more:
· https://myriadgardens.org/events/sham-rock-the-gardens/?mc_cid=be3a1d42ea&mc_eid=71bf387036
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess
Sources: [1] Yahoo! Finance [2] CME Group [3] Bloomberg