Markets are Getting Ugly
Over the weekend, President Trump was asked whether he sees a recession coming. It’s a fair question, given how quickly economists are cutting growth forecasts. The Atlanta Fed already suggests the economy is shrinking. But Trump sidestepped the question and instead emphasized his confidence in tariffs bringing in “hundreds of billions of dollars” and revitalizing U.S. manufacturing.
That’s a bold claim. While unemployment is still low at 4.1%, and factory output has recovered to pre-COVID levels, the overall economy remains largely service-driven. Sure, we could push for more manufacturing, but at what cost? Would a 20%-30% hit to retirement savings be worth it?
Looking at the markets, the S&P 500 is down 8% from its peak, and historically, recessions have led to an average 30% drop. If that pattern holds, we could see the index fall to 4,300—another big drop from here. Unemployment would spike, and not just for government workers.
For investors, the real problem is valuations. Just a month ago, they were extremely high, and now, earnings estimates are being revised downward. The S&P 500 has slipped below its 200-day moving average, a signal that typically suggests a bounce—but this time, the economic damage feels self-inflicted. And with uncertainty at these levels, markets hate it.
Despite the mess, there are opportunities. Hammer and I will continue tracking the situation daily, helping navigate these volatile markets. The best move? Keep some cash ready to buy when the market bottoms—because it eventually will. If that means trimming holdings by 5%-10% now, it’s not a bad idea.
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