Hope you are all doing well. The major U.S. stock indexes fell sharply on Monday but posted big gains over the next four days to rebound from the previous week’s negative results. The NASDAQ surged 6.7% for the week while the S&P 500 finished up 4.6% and the Dow rose 2.5%. NASDAQ’s weekly out performance relative to other major U.S. indexes stemmed from strong quarterly results from major technology companies and the tech sector’s overall strength during the week. Tech stocks in the S&P 500 surged nearly 8% on average for the week; in contrast, the consumer staples sector was down more than 1%.
Sede Vacante
For much of the year the past couple of months the stock market has sat without a leadership group. The tech sector had been a strong leader up until this year. The financial services sector could be emerging as a new leadership group. Financials are less exposed to trade headwinds. They also stand to benefit from a potential pivot from tariffs to tax cuts and deregulation in the coming months. Despite the risk-off trade for markets this year. The financial sector made a new high relative to the S&P 500 last week. The conclave to select a new pope will begin this week, I have broken down this week’s update using some of the traditions involved.
Sealing and Isolation
The U.S. continues to isolate itself from the rest of the world and keep our markets sealed from China, and the markets will remain volatile until real progress is made . We impose a 10% universal tariff on all imported goods with higher levies on China and certain sectors, like semiconductors and pharmaceuticals. The economy I don’t believe will go into a recession but slower growth is possible the longer we go without trade deals being made. The Federal Reserve is not coming to the rescue in the near term. Don’t expect any Fed action before summer. Maybe by July there will be more clarity on the impact of tariffs. If growth slows and unemployment moves higher than the Fed could cut rates two-to-three times this year.
Fumata (Smoke)
We are still seeing black smoke when it comes to trade deals though it seems we are getting closer to seeing the white smoke of an agreement soon. Reports indicate Japan, South Korea and India seem to be very close on trade deals. There also appears to be a softening of the rhetoric between the U.S. and China, though I think that deal will be a much longer process.
As deals start to get announced it should help markets recover a bit more.
The point is these tariffs coincided with the roaring twenties, the economy, the labor market and the stock market did not languish because of the tariffs and subsequent trade war with Europe, it boomed for much of the decade. It continued to boom because the tariffs were issued during a time of prosperity and strength not too different from where our economy and labor market are today. At the end of that decade the stock market crashed and the depression began but the tariffs were not the principal driver of the crash. The boom ended the way many booms end as a result of unchecked greed and lax regulation.
Please use my calendar link below and schedule a phone or zoom appointment. The calendar link allows you to schedule a call as early as the next day. If you are concerned or need to speak to me please use the link and schedule rather than trying to reach me over the phone without an appointment.
