T&G Weekly Outlook Report: Inflation Takes Center Stage as Tariff Fears Escalate⚠️👀
Key data on inflation, tariffs, and economic growth will determine whether markets rebound or continue their slump.
Stocks are feeling the pressure this week as the market digests President Trump’s tariff moves and what they could mean for inflation. While the economy may not be headed for a full-blown recession (yet), there’s plenty to worry about. With inflation numbers in the spotlight and job growth continuing to show signs of slowing, investors are asking: what’s next? Let's break it down.
📉 Tariff Tension and Market Reactions: A Week of Bumps and Bruises
Last week was a rough one for the stock market. The S&P 500 fell more than 3%, the Nasdaq entered correction territory, and the Dow Jones dropped about 1,000 points—and that’s after a nice rally the previous week. Talk about whiplash.
But why? Well, we’ve got tariff uncertainty and the looming question of how President Trump’s policies could impact inflation and economic growth. With trade war fears back on the table, investors are second-guessing their positions. The Nasdaq, which has been riding high on AI optimism, is now seeing a drop of more than 10% from its December record, officially putting it in correction mode. A little rough, right?
🧐 What’s Really Going On: The Fed, Jobs, and Inflation
A lot of eyes are on the Federal Reserve this week. In a speech on Friday, Fed Chair Jerome Powell made it clear that the Fed is in no rush to cut rates just yet. That doesn’t mean the Fed is completely ignoring the economic slowdown, but Powell’s “we’re not in a hurry” vibe wasn’t exactly reassuring. The market had already priced in expectations for three rate cuts this year, so clarity on the Fed's next move will be key to either stabilizing or further unsettling the market.
The February jobs report came in just below expectations, with only 151,000 jobs added (compared to the anticipated 180,000). But considering other weak economic signals, it wasn’t a complete disaster. Economists like Bank of America’s Shruti Mishra called it a “sigh of relief,” suggesting it wasn’t as bad as feared, but it wasn’t exactly a win either.
📊 Inflation: What’s Cooking?
Here’s the real kicker: inflation. CPI and PPI numbers coming this week are expected to shed some light on the ongoing price pressures in the economy. The Consumer Price Index (CPI) for February is expected to show a 2.9% year-over-year increase—down from 3% in January. This sounds like a win, right? Not so fast.
Economists are looking closely at how tariffs could push prices up again, despite a slight dip in the CPI. Sarah House, Wells Fargo’s senior economist, thinks the February numbers will only give us a glimpse of what’s to come. She’s expecting inflation to creep back up towards 3% this spring. You know, the kind of inflation that makes your grocery bill seem like it belongs in a horror film.
🛠️ The 'R' Word—Recession?
Now, let’s talk about the R-word—recession. Are we heading there? Not so fast.
Despite the market’s recent sell-off and downgraded GDP forecasts from major banks like Goldman Sachs and Morgan Stanley, economists aren’t sounding the alarms yet. Goldman Sachs raised the likelihood of a recession in the next year to 20%, up from 15% last year, but that’s still a low probability. Most economists are suggesting that we’re not on the edge of an economic cliff, just in a period of slower growth than initially expected.
And get this: only 13 companies mentioned “recession” in their latest earnings calls. That’s the lowest number since Q1 2018. So, while growth may be slow, most companies aren’t planning for the economy to tank—yet.
📅 What’s on the Calendar This Week:
The next few days are packed with data that could either calm nerves or stoke fears. Here’s what to watch for:
Monday:
New York Fed one-year inflation expectations (Feb.)
Earnings: Asana (ASAN), Oracle (ORCL), Vail Resorts (MTN)
Tuesday:
NFIB Small Business Optimism (Feb.)
Earnings: Casey’s (CASY), Dick’s Sporting Goods (DKS), Kohl’s (KSS)
Wednesday:
CPI and Core CPI (Feb.)
Real average hourly earnings
Earnings: Adobe (ADBE), iRobot (IRBT), Vera Bradley (VRA)
Thursday:
PPI and Initial Jobless Claims (March)
Earnings: DocuSign (DOCU), Dollar General (DG), Ulta Beauty (ULTA)
Friday:
University of Michigan Consumer Sentiment
Earnings: None notable
🔍 Takeaway: Navigating Through the Noise
The outlook this week hinges on whether inflation continues to creep up and how President Trump’s tariffs will impact the broader economy. If you’re a market watcher, buckle up—tariffs and inflation are here to stay for the foreseeable future. Keep an eye on CPI, PPI, and consumer sentiment, as they’ll likely determine whether the market finally stabilizes or plunges further into uncertainty.
And remember, despite the job cuts, rising inflation, and tariff chaos, the “recession” buzzword is still on the back burner for now. It’s a slowdown, not a full-on collapse. At least for now.