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The Current State of Tariffs
Part of doing the best job we can for you includes complimenting our research with insights from top analyst teams around the world. I believe this overview from one of those teams on the current state of Tariffs is quite insightful, succinct, and balanced. Oftentimes, it’s helpful to restate the information as our industry relies too much on jargon and not enough on straight talk. In this case however, I’m not sure I can represent this topic any better so, here it is in its’ unvarnished state…
Q1 GDP, April Employment and Inflation
Over the past two weeks we have received a lot of economic data, including first quarter GDP, April employment data, and April inflation data. While headline numbers were okay, there are some wonky caveats and timing issues to consider. Beyond the headline numbers, we are receiving some mixed signals about the health of the economy. The full effect of the Trump Tariffs is yet to appear in official statistics, but inflationary pressures persist and the labor market may have been throttling back prior to “Liberation Day.” While markets cheered this week’s announcement of a 90-day pause on tariffs with China, we believe the underlying economic data provide reasons to proceed with caution. We’ve largely returned to the stretched equity valuations we had at the beginning of the year, but with a much more uncertain economic backdrop.
Consumer Sentiment is Extremely Bearish – Is that a buying signal for investors?
Consumer sentiment dropped to a historically low level (50.8) in April. Since 1978, sentiment has been lower in only one month (June 2022). With the exception of 2011 and 2022, readings this low tend to occur when the U.S. has already been in recession for several months. However, consumer sentiment is a lagging indicator and historical data suggests that extremely low sentiment has often preceded strong stock market returns. Since 1978, in nearly all such instances (excluding June 2008), the S&P 500 has delivered double-digit gains in the following year.
Know when to hold ’em…
Market volatility has spiked amid trade tensions and uncertain policy moves. With major indices down sharply year-to-date and traditional valuation signals muddied, technical levels hint at where the market could go. As Kenny Rogers said, “You gotta know when to hold ‘em.”