This year has been unlike the last few recent ones in terms of heightened market volatility, despite economic fundamentals staying solid. Despite the bearish sentiment, we see resilience in the economy and we believe recession fears are still unfounded at this point.
Hang on tight, take a deep breath, and relax!
Here are our thoughts.
Tariffs and marketing volatility
We see market volatility due to tariffs as short-lived. Tariffs function as a shock, causing short term volatility, media hype, and political unrest. However, like most short-term catalysts, unless they stick around for an extended period of time they won’t have a significant impact on the economy and/or inflation. At this point, we see them as more of a political bargaining chip used by the current administration rather than a long-term driver of economic behavior.
Fundamentals are holding up
The major economic indicators are still a green light in terms of growth. Inflation has been tepid in spite of tariff fears. The job market is plugging along, earnings are growing at a steady clip, and wages are rising at a rate that is palatable.
Fed steadfastness
The Fed hasn’t embarked on a loosening cycle yet, and seems to be maintaining a conservative, “hawkish” stance. They don’t seem that eager to stimulate more inflation, although there is talk of rate cuts pending. While we don’t know what the extent or timing will be, a rate cut is generally positive for consumer cyclicals, real estate, and financial stocks, as well as medium to longer term bonds (prices and rates move in opposite directions.)
All of these statements are merely conjecture as nobody holds a crystal ball. We cannot emphasize enough that your best protection from market volatility is having a well-diversified and risk-managed portfolio. Knowing the level of risk you are willing and able to take is of paramount importance when the market is topsy turvy.
Please let us know if you would like to talk about anything we’ve mentioned.
-Judd
Sources
Blancato, Philip. March 2025, Osaic, Inc. Navigating Tariff Volatility amid Market Uncertainty