Earlier this week, Trump affirmed that the previously announced 25% tariffs on Canada and Mexico would go into effect on March 4. Then followed it up by saying that “China will likewise be charged an additional 10% tariff on that date”. The new tariff would be applied on top of an existing 10% duty imposed on Chinese tariffs on Feb. 4. Trump also reaffirmed plans to start imposing reciprocal tariffs on a country by country basis by April.
NVidia’s results and PCE (Personal Consumption Expenditures) numbers came in line but that did not stop the S&P 500 dropping by 1.6% on Thursday erasing all the index’s gains for the year so far. The announcement of tariffs sent Hong Kong’s Hang Seng Index to drop by 3.3% on Friday. The selloff then infected Europe – The Euro Stoxx 50 index was down 0.4%. For the week, the S&P slipped 1.0%, while the Nasdaq slumped 3.5%. The Dow bucked the trend, rising 1.0%.
The Atlanta Fed’s estimate for the real GDP growth in the first quarter of 2025 is now forecasted to be a decline of 1.5 percent down from projected growth 2.3 percent on February 19 – a dramatic revision downward in the space of 10 days. While the downward revision may have some negative impact from the higher imports in January ahead of the tariffs, it is clear that GDP growth is definitely slowing down.
Future Wealth’s View
While we can agree that the tariffs on Canada and Mexico, and the ones that went into effect against China, would boost prices stateside, it’s unclear by how much, or when American shoppers will feel the sting. But, consumer spending is already declining and higher prices could send shoppers to cheaper alternatives or not spend at all. With mass layoffs and firings that are being precipitated by DOGE coupled with a stock market that is teetering on edge, we believe the outlook over the near term looks very risky.
Investors are looking at data that is not very encouraging – housing starts are not good, jobless claims are going up, consumer confidence is dropping, economy could be slowing, inflation looks like it could inch up again and the bad news continues. We, at Future Wealth LLC, believe that higher prices and weaker growth awaits. And, we expect the constant barrage of political headlines from the Trump Administration will take a toll on the market.
For those who witnessed the embarrassing meeting at the White House between Trump and Zelensky on Friday, the repercussions of the US abandoning assistance to a nation at war with a Russian despot could be a harbinger of new world order. It is almost certain that, following that cringe worthy broadcast from the Oval Office, Xi Jinping instructed his Politburo members to dust off China’s plans to invade Taiwan and bring it up for discussion at the next meeting.
Over the past two weeks we had cautioned investors in our reports stating that “We are in a situation where the stock market could post a return of >10% in 2025 or we could have a sharp correction of >10%.” While the cooling of the economy does not mean that we are in the precipice of a recession, we now believe that a modest stock market correction could occur in the next 3-6 months.
It is time to take profits from last few years and take cover in defensive investments.