US stocks were looking to break a four-week losing streak today, but as I write this on Friday morning, it’s looking a little iffy. Investors remain nervous over two big events on the near-term horizon – 1) reciprocal tariffs going into effect on April 2nd, and 2) 1st quarter earnings announcements soon after April 2nd.
Bloomberg had this to say regarding US stocks this week –
“Stocks may come under increasing pressure this year, as policy prerogatives amplify the rotation away from early-cycle winners to new leadership. Cycle recovery may continue to spread to unloved corners of the US equity market, as long as a consumer-led recession is avoided and the Federal Reserve stays onboard with easing.”
When they mention a “rotation away from early-cycle winners to new leadership,” they’re simply saying that sectors that worked well last year (consumer discretionary and technology) are now being replaced with sectors that were lagging (healthcare, energy, utilities). As such, this year’s market activity so far looks more like a rotation than the beginning of a significant decline.
The Fed met this week and announced no changes to interest rates, as expected. They also left their expectations of two rate cuts before the end of the year unchanged, which is consistent with market forecasts. All in all, not much new from the Fed this week.
Finally, discussions around tariffs and inflation have promoted an apparent paradox in the media – tariffs will result in higher prices, but tariffs won’t cause inflation. On the surface, this may not make sense. After all, doesn’t inflation mean higher prices? Yes and no. We measure inflation as the RATE at which prices rise. Those who claim that tariffs will not cause inflation generally admit they will result in a ONE-TIME price adjustment, but tariffs wouldn’t necessarily begin an accelerating TREND of higher prices. This makes sense in principle, but we’ll just have to wait and see what happens in practice if the Trump administration goes through with the April 2nd tariffs.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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