No. of Recommendations: 3
Here are a few thoughts from me.
Federal Reserve interest rates have been set at a level to dampen economic activity and bring inflation down to the target of 2%. The economy has continued to power forward in something of a Goldilocks state with inflation around 3%. Tariffs on Mexico, Canada and China will cause an increase in inflation, as consumers pay at least a good chunk of the 10-25% increased cost of goods from those countries. This will keep the Fed from lowering interest rates very much, if any, in the near future.
At the same time, the economy and employment will likely take a hit as Trump and Musk "move fast and break things", resulting in hundreds of thousands of unemployed former federal workers, with knock-on effects, and the flow of massive amounts of Federal money suddenly ceasing within numerous sectors of the economy like clean energy, pollution control, environmental remediation, foreign aide, and non-profits, not to mention weapons and associated military goods.
The business of war is not one I admire, but it's long been noted to be one that is profitable and its scale influences the US economy. What happens when the vast demand for weapons, ammo, and other gear from Ukraine is abruptly removed from that sector of the economy? It will be hard to quickly offset the loss of tens/hundreds of billions of dollars of Ukraine aide.
It seems to me like the ball could be rolling that turns into the next recession and bear market. Short term interest rates being fairly high gives market participants an easy place to turn if they get scared of further losses in the stock market. And what is currently a temporary correction could snowball downhill into a bear market fast. Seems like we're about due.
I'm going to be looking to put more capital in the stock market if so, small cap value.
