Stocks Stumble on Talk of Tariffs and Trade Wars
In the market’s closing hours on Thursday, March 22, the Dow Jones Industrial Average slipped more than 700 points, seemingly on concern raised by proposed tariffs and the threat of future trade issues with China that could affect global growth. The S&P 500 also trended downward in the last hour of trading on Thursday, the most since early February. The potential for rising interest rates coupled with increased tariffs has generated concern among some investors despite strength in the underlying domestic economy and labor markets. As of approximately 12:00 Noon today, Friday, the Dow Jones is close to breakeven.
Raymond James Chief Economist Scott Brown believes investors are concerned that the proposed tariffs could lead to retaliatory tariffs or broader trade disruptions. For the financial markets, it’s been a back-and-forth between unfavorable trade policy moves (e.g., the steel and aluminum tariffs) and the partial walking-back of those moves (e.g., exempting Canada, Mexico and other nations from those tariffs). In his view, Thursday’s announcement to impose tariffs on Chinese goods creates uncertainty for domestic and global economies. European Strategist Chris Bailey believes President Trump’s announcement was the opening round in the start of hard negotiations, and Bailey interprets the measured response and concessions on the proposed aluminum and steel tariffs to be positive signs.
While headlines represent an increase in the policy headwinds coming out of Washington, D.C., we are reminded that policy shifts may not be as bad as we fear, nor, perhaps, as good as we hope. Often, that gray area represents a buying opportunity for investors poised to take advantage. As the United States and China open up trade negotiations, Washington Policy Analyst Ed Mills believes the most likely outcome is that the market will start to recover if China takes a measured response to mitigate the impact of the proposed tariffs.
As you likely recall, the domestic equity markets have gone back and forth since the beginning of the year, following a sustained period of very low volatility. Our rational selves understand that rising tides can’t last forever, but the gyrations do often feel a lot worse than they really are.
However, the jury is still out. The coming months likely will be unpredictable, but current economic conditions and fundamentals remain supportive of equities (i.e., stocks). As always, we will continue to monitor the relevant data and share key findings with you as appropriate.
In the meantime, we understand if you have questions. It’s normal to have concerns when volatility returns after a long absence. We have seen these vacillations before and have witnessed the subsequent resilience of the markets over time. That’s the reason we believe that disciplined
financial planning that accounts for the occasional market recalibration is most likely to help you achieve your long-term financial goals.
Please let us know if you have any questions about recent market events or any area. As always, thank you for your trust in us.
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Dow Jones Industrial Average: The Dow Jones Industrial Average is a composite of 30 stocks spread among a wide variety of industries, such as financial services, industrials, consumer services, technology, health care, oil & gas, consumer goods, telecommunications, and basic materials. The index represents approximately 23.8% of the U.S. market, and is price weighted (component weightings are affected by changes in the stocks’ prices).
S&P 500: Representing approximately 80% of the investable U.S. equity market, the S&P 500 measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market‐weighted index calculated on a total return basis with dividend reinvested.