Volatility continued last week as markets posted their 1st weekly loss in 3 weeks. Despite some recovery on Friday, the S&P 500 dropped 2.04%, the NASDAQ slipped 1.12%, and the Dow lost 3.05% for the week. Internationally, the MSCI EAFE fell 2.91%.
Last week’s ups-and-downs began with continued questions over whether the Fed will raise interest rates. By the week’s end, however, rumors of an international trade war dominated the attention of investors.
New Fed Chair Jerome Powell testified on Tuesday that inflation and a strong economy may lead to interest rate hikes sooner than expected. Whether the Fed will impose a 4th hike this year caused investor uncertainty and led to mid-week market drops. Powell noted, however, that increased market volatility will not influence the Fed’s decisions regarding rate increases.
Investor attention shifted on Thursday as President Trump announced plans to impose a 25% tariff on steel and a 10% tariff on aluminum imports. While the move could protect American metal workers, some analysts worry it may also trigger a possible trade war.
Countries around the world reacted to the news, with some announcing their own plans for U.S. tariffs in response. Over the weekend, the President reacted by noting possible tariffs on imported autos, where the U.S. has a deficit. Some analysts worry this could further hurt an already negative trade gap in our Gross Domestic Product (GDP).
Signs of Strength
Despite the developments with tariffs and rising interest rates, we did receive encouraging economic reports:
Expect more market volatility going forward as investors follow the Fed’s interest rate plans to keep potential inflation in check. The President has also promised to announce specific details concerning the proposed new tariffs this week. If you have questions concerning how these developing economic policies may impact your financial life, we are always here to help.
Monday: ISM Non-mfg Index
Tuesday: Factory Orders
Wednesday: ADP Employment Report
Thursday: Jobless Claims