Markets adjust to tariff news
What's going on...
- Tariff announcements last week came in higher than many investors were expecting. This led to market volatility as estimates for global economic and earnings growth shifted.
- Here’s the backdrop: The current administration views tariffs as a multi-faceted tool—one that can generate revenue, increase domestic manufacturing, protect industry, and even combat the opioid crisis. However, many economists argue that tariffs are a form of taxation, which could potentially increase inflation and hinder economic growth.1 The ultimate impact of these tariffs remains to be seen. Read this Fidelity Viewpoints article for more on tariffs.
- What does this mean for consumers?
- Companies may pass on higher costs to consumers.
- Consumers may choose to reduce spending and find substitutes for various goods by shifting away from higher prices.
- Consumers may find a different mix of items in stores, depending on the country of origin.
- The situation is evolving rapidly. It's likely that we'll hear more about negotiations and trade deals in the coming months. We should expect further market volatility as news unfolds.
- While uncertainty can lead to an economic slowdown, it will not necessarily lead to a recession. For now, we believe the economy remains in a period of expansion. Investors should remain focused on their long-term financial goals and avoid making changes based on short-term events. Overall, US stocks have increased over time.2 Additionally, a well-diversified portfolio consisting of global stocks and bonds may provide a smoother investment experience than just owning US stocks alone.3
Group Leader and Portfolio Manager, Strategic Advisers
"The actual impact of tariffs depends on the balance of power between buyers and sellers. If buyers hold the leverage, they may seek alternatives, mitigating inflationary pressures. However, if sellers have the upper hand, they’re more likely to pass on increased costs to consumers, contributing to inflation."
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