Stocks Fall Sharply on Continued Tariff Uncertainty

Good morning, and Happy St. Patrick’s Day!

The Dow (-3.1%), NASDAQ (-2.4%), and S&P 500 (-2.3%) each fell sharply for the week, despite a strong rally of over 1% on Friday.  In fact, the S&P 500 joined the NASDAQ in correction territory, falling 10% below its peak from one month ago.  Taxable bonds fell about 0.1%, but tax-free municipal bonds fell 0.9%, as the 10-year Treasury remained unchanged at 4.32%.

Volatility remains the key theme lately, and that is mostly caused by the tariff uncertainties.  Those uncertainties have a ripple effect.  For starters, economists are unclear as to whether the tariffs will cause inflationary pressure, which is never good.  Further, corporations struggle with projecting their earnings when the future cost of goods remains uncertain.  Interestingly, that last fact has caused companies to rush out and buy goods before the potential of tariffs hitting, as shown by the chart below.

The potential for trade wars is creating angst among investors as well.  However, given the size of the US economy relative to most other countries (see chart below), we are more capable of enduring a “trade war” with a much smaller country.  This certainly can create an outcry by many folks and other countries, but we can only hope that it benefits the US, its economy, and its citizens over the long run, and doesn’t hurt anyone along the way. 

^{Source: Wikimedia}

As noted by our CFA consulting team, investors should remain calm and diversified and not worry about the near-term volatility that was due to occur as valuations were elevated.  Happy St. Patrick’s Day, and the start of the March Madness basketball tournament.  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.}