The last month has been quite exciting in the markets with all of the tariff uncertainty. Thankfully, so far it appears that the tariffs are turning out as we hoped and expected. There have been many exemptions and quite a few deals made. We expect that to continue in the coming months and hope that the end result to the market turns out to have been a temporary dip.
Despite all of the hubbub going on politically, the last few weeks in the markets have actually been quite good, The S+P 500 is only down about 3% YTD, despite being down almost 15% just a month ago. Thankfully we were able to take advantage of that decline by doing some small buys in the market. The economy on the other hand, has definitely felt the effects of all of this uncertainty, which we saw with a decrease in GDP for Q1. It would not surprise me in the least to see that what happened in April will make Q2’s GDP significantly smaller and possibly even negative.
So why is the market happy with this? It’s simple. As we have been repeating for a couple of years, the economy has been way overheated. The Fed has been trying and succeeding in slowing the economy through monetary policy. The uncertainty around tariffs has simply slowed the economy more quickly than it otherwise would have. That is not to say that the economy is slow. In fact, The Fed yesterday declined to reduce interest rates because the economy is still strong. The good news is that the uncertainty has likely accelerated the next interest rate cut and potentially increased the number we might see this year, which is what the stock market wants.
To summarize, we are once again in that weird place where the market wants bad economic news. So things like rising unemployment and falling consumer confidence can very much make the market rise. Our plan hasn’t changed, and we will continue to buy if we get significant declines and will likely sell if we feel the market is overpriced. With the recent downturn and partial recovery, the market is still underpriced and we expect it to continue to climb as the interest rate cycle continues.
