Following a 4-week tariff tantrum that sent the major averages into correction territory. The markets deeply oversold conditions led them into the close with small gains. Since Monday the S&P 500 is up 29 points or .52%, The NASDAQ added 30 points or .17% while the DOW gained 497 points or 1.2%. The first positive week for the markets since Valentines.
FOMC Meeting
Was the big news this week. As widely expected, the Fed left rates unchanged at 4.25%-4.5%. The one minor surprise was the announcement that QT or Quantitative Tightening. Would moderate from 25 billion a month for Treasuries to just 5 billion. Mortgage Backed Securities of MBS were left unchanged with a 35 billion/month runoff. Secretary Powell also pushed back against the aggressive rate cut crowd. Indicating that at best two cuts would be made this year. More likely just one. Sometime in the second half of the year. Mr. Powell also went on to note that incoming economic data remained solid. Inflation should remain stable, and that the probability of a recession was low.
It’s The Economy Stupid
First quarter economic growth estimates or GDP, remain all over the map. Weaker consumer spending and trade data dragged the latest estimate from Deutsche Bank down a point to 1.5% and 2.3% for the year. Bank of America chimed in with a 1.9% quarterly estimate. Goldman Sachs figures 1.3%. Last but not least the Atlanta Fed GDPNow model came in at -1.8%. Somebody’s going to be wrong, my money is on the Atlanta Fed. Who generously provided the chart.
Did I Hear Tariffs?
Most people don’t like surprises. This is doubly so for the markets, think tariff tantrum, and to a lesser extent the economy. Both have been more than a little skittish so far this year. As President Trumps rapid fire tariff proclamations have left many with vertigo. With April Fools Day next Tuesday, tis the season for surprises. Wednesday April 2nd will see the Commerce Department kick off the reciprocal tariff program. That will apply a tariff on a country’s domestic imports. Equal to the average tariffs applied by the source country on American imports. Billed as “Liberation Day for America” by President Trump. More than a few pundits figure the markets haven’t fully priced in the effects of this. Given the propensity of “last minute trade tariff deals”. I doubt it will prove to be much of an event. That said tariffs, if applied, will put some upward pressure on imports and to a lesser extent other prices. Particularly for items made with imported raw materials, metals, timber, rubber etc.
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