Stocks and Bonds Fall Sharply on Tariff Uncertainty

Good morning!

The Dow (-2.4%), NASDAQ (-3.5%), and S&P 500 (-3.1%) all fell sharply last week.  Similarly, taxable bonds and tax-free municipal bonds fell 0.5% - 0.6% for the week.  The 10-year Treasury yield rose 0.13% to finish the week at 4.32%.

Stocks fell across the board as uncertainty surrounding the tariffs heightens.  On-again and off-again tariffs, the unknown duration and potential reciprocal actions have caused uncertainty among investors, which usually causes the markets to go down.  Artificial intelligence (AI) stocks that led the rally the past couple years have seen a sharp selloff, sending the NASDAQ into correction territory (10% below its peak).  The Institute of Supply Managers (ISM) manufacturing report came in weak for February, and tariff uncertainty is to blame for that as well.

Last Friday’s labor report showed that the US gained 151,000 jobs in February, below analysts’ expectations. However, unemployment claims fell from the prior week.  Economic concerns are also rising, as major retailers have recently expressed concern over a weakening consumer, which is also evidenced by a steady rise in defaults over the past 1+ year (see chart below).  Lastly, Congress will need to address the budget deficit, as that needs to be resolved in the next week.

So, what does all this mean?  Market drops like this are common and occur every year, especially when there is so much uncertainty like we are currently seeing.  Despite the consumer showing some weakness, the US economy is still strong and has historically been very resilient.  It’s times like this that having a well-diversified portfolio can help shield against sharp losses.  Once the uncertainty has lifted, it often results in a sharp rally upward, and we wouldn’t want to miss that.  In short, it’s not time to be running for the hills.

Have a great day and terrific week!

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}