Navigating Turbulent Times
In Like a Bear, Out Like a Bull April was a rollercoaster month for the record books. President...
|
Just over two months into President Trump’s second term, major policy announcements have rocked the markets amid a sharp spike in investor uncertainty. Following mid-February's highs, the markets continued the retreat into March as deteriorating corporate guidance, weaker consumer spending data, and rising concerns about inflation further weighed on investor sentiment. On April 2, the uncertainty was intensified by the sharp increase in tariffs on imports from around the world, further pressuring the markets and threatening the economy. Since this saga began unfolding in February, we have taken concerted action in our clients’ portfolios to position them defensively until the clouds of uncertainty pass. Market Performance March was marked by significant volatility, with the S&P 500 declining 5.75%, its worst monthly performance in more than two years. The consumer discretionary and technology sectors were responsible for much of the market weakness—each shedding 8.3% in March, while the other sectors—particularly the defensive Staples, Healthcare, and Utilities sectors—held up better and helped maintain their 4.5%-plus gains year-to-date. Over the same period, developed international equities have posted strong gains of 8.25% versus a 4% loss for the S&P 500 Index, reflecting a rotation out of expensive US growth stocks and highlighting opportunities internationally. One of the few bright spots, bond prices have jumped amid the plunge in Treasury yields to near 4%. Amid the dramatic stock market decline following the April 2 announcement by the White House, it is too soon to determine the full impact of the new tariffs going forward; but early signs point to significant headwinds for the economy. Economic Resilience Facing Tests Recent economic data has highlighted increasing strain on consumers and businesses, evident in weak new home sales, slowing retail activity, rising credit card delinquencies, and withering consumer and business sentiment. Corporate investment is showing signs of stalling and manufacturing reversed its prior expansion, returning to contraction territory in March, indicating broader economic vulnerabilities. The labor market has so far maintained stability, with steady unemployment figures and wage growth that continues to surpass inflation. Still, surging layoff announcements and decreasing job openings point to future weakness. Federal Reserve: Balancing Inflation and Economic Growth Uncertainty The Federal Reserve kept interest rates steady at its most recent meeting, maintaining a restrictive stance while assessing the impact from executive branch policy shifts on inflation and economic conditions. Core inflation remains elevated, with persistent price pressures in services, and consumer inflation expectations have risen substantially. Combined with weakness in consumer spending, stagflation—economic contraction with higher inflation—has dominated the news headlines and whipsawed expectations for rate cuts by the Fed this year. Our Outlook In our opinion, signs of economic weakness and new tariffs are raising the odds of a recession. While a deep recession is unlikely—due to strong bank and household balance sheets—we expect continued market volatility. However, we anticipate that the Fed will ultimately focus more on supporting the labor market than on stamping out inflation as economic headwinds build. Over time, a more accommodative stance should bolster economic conditions and corporate earnings, helping to renew market resilience. Times like these highlight the value of active portfolio management. Since early February, we have been positioning our clients’ portfolios very defensively and diversifying internationally to buffer losses while being prepared to seize on opportunities and participate in an eventual market rebound. We believe that sticking to the plan and allowing us to navigate turbulent times is the key to clients’ achieving their long-term goals. |
|
DISCLOSURE: Adams Wealth Management is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. |
