Worried About a Recession?
Over the past week, the stock market lost $4 trillion in value. Many investors are very worried about the economy and the stock market. “The pullback in confidence has generated speculation that a sentiment-driven recession could be in the cards this year, a possibility Trump wouldn’t rule out during an appearance on Fox News on Sunday. The comments sent markets into a tailspin on Monday, yet sentiment data has been a bad economic indicator in the past few years, says Philipp Carlsson-Szlezak, Boston Consulting Group’s global chief economist.” Leonhardt, Megan. “Is a Recession Really Coming? 3 Indicators to Watch.” Barron’s. March 12, 2025. The reason that consumer sentiment isn’t always an accurate recession indicator is that it can change on a dime. Sentiment often doesn’t take into account more than one economic data point and is usually based on non-economic factors or only one factor or data point such as Fed Chairman Powell commenting on raising or lowering interest rates.
Investors are currently overlooking positive economic data and are hyper focused on the potential negative impacts of tariffs. Consumer spending, household savings, and corporate earnings remain strong. February’s consumer spending and household savings numbers will be released on March 28,, 2025. “Uncertainty around potential positive or negative short-term shocks to the market points to a need for diversification and long-term thinking. Our base case is for a resilient U.S. economy (albeit with sticky inflation), which informs our overweight to U.S. equities…Further portfolio diversification through exposure to alternative asset classes can help provide ballast during market volatility…The tariffs may create market volatility, but long-term investors should focus on their overall strategic goals rather than reacting to short-term market volatility.” Scarsciotti, Michael, Ravichandran, Ravi, Pineault, Brad. “What the recent Tariffs could mean for the market and investors.” February 2025.
Tariffs don’t always hurt the economy. “Historical data suggests that tariffs do not necessarily drive sustained inflation; rather, they create demand headwinds by functioning as a tax and can lead to slowdowns in consumption. In 1971, 2002, and 2018, inflation decelerated following tariff implementations. It is still early days to determine whether the imposition of tariffs is a negotiating tactic or long-term policy tool.” Scarsciotti, Michael, Ravichandran, Ravi, Pineault, Brad. “What the recent Tariffs could mean for the market and investors.” February 2025. The stock market also performed well in President Trump’s first term. “Through Biden's four-year term, which ended January 20, 2025, the S&P 500 gained 57.85%. In Trump's first term, the S&P 500 gained nearly 68%.” Stock market under the Trump administration. US Bank. March 6, 2025. Stay focused on the long term and stay invested. Ensure your portfolio is diversified and properly allocated, so you are not taking unnecessary risks. Review your investment goals and make sure they are in line with your values.