Donald Trump is escalating his global trade war, issuing increasingly wild threats as targets from China to Canada and Europe retaliate with tariffs of their own rather than retreat. In the meantime, the resulting chaos has driven the S&P 500 into a correction. Nasdaq is already in a correction. Correction is defined as >10% decline from recent highs. A further 10% drop would signal a bear market.
The stated goal of Trump’s tariff war may have a critical flaw. One of its goals is to boost domestic production and reduce the deficit. But the US trade deficit with the rest of the world is a result of broader factors powering the US economy. These include the dollar’s status as the world’s reserve currency, Americans’ appetite for cheap goods from abroad as well as company supply chains that extend across different countries and which took decades to develop.
All eyes are now on the Fed, whose monetary policy committee will kick off a two day meeting on Tuesday. The central bank is expected to keep its key policy rate steady, and the focus will be more on Chair Jerome Powell’s remarks about the economy and Trump’s tariffs. For the week, the S&P slipped 2.3%, while the Nasdaq slumped 2.4%. The Dow cratered 3.1%.
Future Wealth’s View
It’s always a bad time for a market selloff—but especially for those nearing retirement. The S&P 500’s nosedive from a recent high has immediate economic consequences for them as they see their investments continue to shrink. Many of them are already in the early years of retirement, or preparing to leave the workforce. And if they were to suffer persistent and deep losses while needing to withdraw money for living expenses, it’s likely their portfolios would never fully recover.
We, at Future Wealth LLC, believe that things could get worse from here with further auto tariffs going into effect on April 2 followed by earnings season in mid April that could have US corporations missing Q1 expectations and guiding lower for Q2. And, more inflation and unemployment data will be coming that will begin to reflect the rising prices and rising unemployment. Consumer spending is already slowing down with everyone from Walmart to Pepsico to Puma to Hugo Boss and all the major airlines warning of a weakening consumer. Furthermore, the impact of higher tariffs and DOGE layoffs have yet to be reflected in the CPI and unemployment numbers.
Two weeks ago, our report was titled “Brace for a Correction”. Link to the report is here – https://futurewealthllc.com/