Over the weekend, Trump went on TV and pointedly refused to rule out a tariff-fueled recession in the United States. Anybody who attended an eighth grade economics class already understood this risk of course, but for Trump to come out and finally admit it was a new development.
The administration's blasé attitude toward potentially setting off a severe downturn badly rattled Wall Street. The week got under way with no prospect of any clearing of the fog of uncertainty surrounding tariffs and market sentiment was decidedly gloomy as the session began on Monday.
The recent meltdown and non-stop churn of volatility rapidly intensified as investors rushed to get ultra-defensive. Dip-buyers yanked the safety net by sitting firmly on their hands and the session became an absolute horror show for the stock indexes. Big Tech/AI names got especially hammered with the tech-heavy NASDAQ index, which was down 5% at one point, enduring its worst day in years. Contagion spread to previously-well-behaved stock markets in Europe and Asia which also dumped.
There was a brief attempt to recover from the previous day’s wipeout at the open on Tuesday but it was very short-lived as head-spinning chaos quickly returned to tariff-world. At 10am ET, Trump came out and doubled the proposed metal tariffs on Canada to 50% (and at the same time reiterating his 51st state annexation nonsense) in retaliation for the retaliation of his northern neighbor.
This reminded Wall Street that a thin-skinned tit-for-tat tariff policy could get very nasty very quickly in a world where foreign reprisals against US-imposed tariffs is to be fully expected. Stock prices puked again, but then whiplash struck once more as Canada (specifically Ontario) relented on its retaliatory measures and by 2pm ET Trump had canceled the enhanced counter-counter-measures. The stock indexes changed direction to erase at least some of the day’s losses by the close. Traders trudged home dazed and confused.
After the closing bell, the House passed a bill to push back a government shutdown to September 30th and before the open on Wednesday, the Consumer Price Index (CPI) measure of retail inflation came in a touch cooler than expected at 2.8% annualized. A market starved of any good news lately gobbled up these developments and there was a rebound of sorts in the indexes and stocks ended the day a little higher.
It was a busy pre-market on Thursday. The Producer Price Index (PPI) measure of wholesale inflation experienced by manufacturers confirmed the slight softening of inflation. Weekly Jobless Claims were unchanged. The high stakes game of government shutdown chicken moved to the Senate.
Another day, another tariff. Trump turned his sights on Europe this time, floating a fantastical 200% levy on some alcohol and food imports from the EU, reinforcing the idea that there’s no plan here, just random angry noise.
It resulted in another horrible day for the stock market as an early swoon in prices rapidly accelerated into another rout caused by worries that the so-called “uncertainty tax” on the markets is just getting worse and worse. The S&P 500 retreated into official correction territory (the seventh fastest correction in history, representing a loss in total US stock market value of about $5.3 trillion in just 16 trading days), but once again it was Big Tech/AI names that were punished the hardest. As Josh Brown put it, the NASDAQ has become a meat grinder in 2025.
Overnight, breakthroughs were made in the federal shutdown impasse and by the open on Friday it was evident that yet another last moment can-kicking compromise would likely be cobbled together. BTFDers were finally triggered by the week’s bloodshed and went shopping.
Stocks at long last had themselves a really good session, despite data showing a massive dive in consumer sentiment about the outlook for the economy with long-term inflation expectations among Americans higher than at any time since 1993. But the day’s solid gains didn’t come close to rescuing what was a fourth straight week of losses.
Right now, there are only three things moving these markets:
Tariff Threats/Policy Chaos
Economic Growth
Fed Policy Expectations
Those factors have all contributed to the recent correction and until we see improvement in each of them, it’s unlikely this pullback will meaningfully reverse.
Things get better if:
it becomes clear that tariffs are ultimately just a negotiating tactic and nothing long-lasting is implemented. Alternatively, the administration finally provides a clear, realistic and consistent trade policy that reduces or eliminates uncertainty and whiplash.
economic data remains solid and pushes back against the policy-driven growth scare that’s currently pressuring markets.
Fed officials turn more dovish and a June interest rate cut becomes widely anticipated.
Things get worse if:
Trump follows through with existing tariff threats, with April 2nd seeming a key date. Meanwhile, the headline chaos continues with no end in sight, paralyzing business decision-making/investment and consumer spending.
major economic data points drop sharply, reinforcing a growth scare and increasing recession fears.
higher inflation and/or tariff anxiety causes the Fed to hold off on making further interest rate cuts.
If you are not yet a client of Anglia Advisors and would like to explore becoming one, please feel free to reach out for a complimentary no-obligation discovery call with me.
ARTICLE OF THE WEEK ..
The biggest global losers from all the tariff talk? You and me. The numbers don’t lie.
QUOTE ..
“Here’s the interesting thing about the stock market: it cannot be indicted, arrested or deported ; it cannot be intimidated, threatened or bullied; it has no gender, ethnicity or religion; it cannot be fired, furloughed or defunded ; it cannot be primaried before the next midterm elections ; and it cannot be seized, nationalized or invaded.
It’s the ultimate voting machine, reflecting prospects for earnings growth, stability, liquidity, inflation, taxation and predictable rule of law.”
Michael Cembalest, Chairman of Market and Investment Strategy for J.P. Morgan Asset and Wealth Management.
LAST WEEK BY THE NUMBERS:
Last week’s market color courtesy of finviz.com
Last week’s best performing U.S. sector: Energy (two biggest holdings: Exxon Mobil, Chevron) ⬆︎ 2.4% for the week
Last week’s worst performing U.S. sector: Consumer Cyclical (two biggest holdings: Amazon, Tesla) ⬇︎ 4.7% for the week
SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest U.S. companies. Its price fell 2.4% last week, is down 4.0% so far this year and ended the week 8.2% below its all-time record closing high (02/19/2025).
IWM, the Russell 2000 Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest U.S. stocks. Its price fell 1.5% last week, is down 8.2% so far this year and ended the week 16.3% below its all-time record closing high (11/08/2021).
INTEREST RATES:
FED FUNDS * ⬌ 4.33% (unchanged)
PRIME RATE ** ⬌ 7.50% (unchanged)
3 MONTH TREASURY ⬇︎ 4.33% (4.34% a week ago)
2 YEAR TREASURY ⬆︎ 4.02% (3.99% a week ago)
10 YEAR TREASURY *** ⬇︎ 4.31% (4.32% a week ago)
20 YEAR TREASURY ⬇︎ 4.65% (4.66% a week ago)
30 YEAR TREASURY ⬌ 4.62% (4.62% a week ago)
Treasury data courtesy of ustreasuryyieldcurve.com as of the market close on Friday.
* Decided upon by the Federal Reserve. Used as a basis for interbank loans and for determining high yield savings rates.
** Used as a basis for determining many consumer loan rates such as credit cards, home equity and auto.
*** Used as a basis for determining mortgage rates.
AVERAGE 30-YEAR FIXED MORTGAGE RATE:
⬆︎ 6.65%
One week ago: 6.63%, one month ago: 6.85%, one year ago: 6.74%
Data courtesy of: FRED Economic Data, St. Louis Fed as of last Thursday.
FEDWATCH INTEREST RATE TOOL:
Where will the Fed Funds interest rate be after the next rate-setting meeting on March 19th?
Unchanged from now .. ⬆︎ 98% probability (88% a week ago)
0.25% lower than now .. ⬇︎ 2% probability (12% a week ago)
What is the most commonly-expected number of 0.25% Fed interest rate cuts in 2025?
⬌ 3 (unchanged from a week ago)
All data based on the Fed Funds interest rate (currently 4.33%). Calculated from Federal Funds futures prices as of the market close on Friday. Data courtesy of CME FedWatch Tool.
FEAR & GREED INDEX:
“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.
The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.
Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.
Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.
A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.
Data courtesy of CNN Business as of Friday’s market close.
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