Tariff uncertainties and mixed economic data slammed sentiment this week. Donald Trump’s back-and-forth over tariffs against Canada and Mexico has stoked confusion in traders. Markets have now given up all the gains sparked by Trump’s election victory in November last year.
In terms of economic data, tariff impacts showed up significantly in January’s trade numbers. A huge spike in imports ahead of tariff implementation resulted in the trade deficit hitting a record. Job growth in the month was less than expected, as federal employment took a hit from Trump and Elon Musk’s push for efficiency.
In the face of furious fallout both at home and abroad to his 25% sanctions against Canada and Mexico, with markets plummeting, automakers yowling and Canada pounding its chest, Trump announced he would exempt some goods from both countries, but only for a month. If that sounds familiar, it’s because this is the second month of delay Trump granted on his own tariffs.
Wall Street’s benchmark S&P 500 index on Friday posted weekly losses of more than 3%, its worst weekly performance since early September 2024. For the week, the S&P slipped 3.1% while the Nasdaq Composite slumped 3.5%. The Dow fell 2.4%.
Future Wealth’s View
Inflation has proven sticky and stagflation is now a threat. As consumers start to pull back on spending, businesses may start to rethink hiring plans. More Americans are permanently out of work and fewer workers are on federal government payrolls. And there could be more bad news to come.
Corporate America isn’t waiting to figure it out, though, It’s preparing consumers for more inflation. Target Corp., in its earnings call revealed that customers will have to pay more money because of Trump’s tariffs. Target expects that items with a shorter supply chain, like fresh produce, could be affected quickly. Best Buy, also echoed the price warnings on its earnings call, telling investors that increases are “highly likely” on its gadgets and appliances.
If Trump were to change his mind again, perhaps now would be a good opportunity to buy the dip. But, no one knows what awaits. At Future Wealth LLC, we have begun to dial back the risk across all our client portfolios. In the near term, we simply do not see predictable growth investments in the US markets. If anyone has better insight, we will gladly take your call.