It was a week dominated by Donald Trump’s announcements on tariffs. On Monday, he announced 25% levies on all steel and aluminum imports into the U.S. On Thursday, he signed a memorandum that tasked his administration with investigating current trade relations and proposing reciprocal tariffs on a country specific basis. Still, the fact that the president did not immediately put into effect the tit-for-tat tariffs and was scant on details helped market sentiment.
A hotter than expected consumer inflation report on Wednesday coming in at 3% was offset by a favorable producer inflation report for January on Thursday, as the components in it that feed directly into the Federal Reserve’s favorite inflation gauge came in soft. For the week, the S&P 500 gained 1.5%, while the Nasdaq surged 2.6%. The Dow added 0.5%.
Future Wealth’s View
US wholesale prices rose in January by more than forecast on higher food and energy costs, adding to the growing pile of bad inflation news ahead of more potential tariffs threatened by the Trump administration. US retail sales slumped in January by the most in nearly two years, indicating an abrupt pullback by consumers after a spending spree in the closing months of 2024. The consumer sentiment report showed people were getting nervous and high prices and weak retail sales confirmed it. Donald Trump’s tariffs against China, on steel imports and potentially against trading partners Canada and Mexico will only accelerate the trend.
Together, the figures are making the prospect of an interest rate cut this year by the Federal Reserve unlikely. It is possible that we may have no rate cuts for 2025, while more bad news may prompt the central bank to actually start raising rates again. We are in a situation where the stock market could post a return of >10% in 2025 if inflation drops back or we could have a sharp correction of >10% if inflation continues to climb. We, at Future Wealth LLC, believe that it is time to take steps to protect your portfolio. You may have to give up on some gains but losing money could be more painful.
As the saying goes, “You can’t time the market, but you can time your decisions.”