“May you live in interesting times,” was my favorite Chinese curse when I was twelve. And despite its being English in origin, and not exactly a curse, it remains a favorite. But a little too on the nose today, perhaps?
We sit in between the economic news releases of last week and the possible tariff impositions of the day after tomorrow. Interesting enough for you?
The data points were disappointing. Inflation, as seen in the Personal Consumption Expenditures Index (PCE), came in higher than hoped, with overall PCE up 2.5% year-over-year, and the Core PCE up 2.8% year-over-year. The Federal Reserve’s target inflation rate (say it with me) is 2%
Fed Chairman Jerome Powell, when he spoke on March 19th, indicated that he expected (hoped?) tariff-caused inflation would be transitory. But since then, more tariffs have been announced, most notably a 25% tariff on cars and car parts not manufactured in the U.S. Since even U.S.-based carmakers coordinate manufacturing with plants in Canada and Mexico, this could raise car prices for Americans across the board, except for Tesla buyers. Teslas which are sold here are 100% made here. President Trump told NBC News that he didn’t care if automakers raised prices, because it would encourage people to buy American cars and encourage carmakers to build them in the U.S.
It is no surprise that U.S. consumer sentiment is falling, hitting its lowest level in 12 years in March. The reading of 65.2 is well below the 80 level that is considered a signal for a coming recession. Additionally, only 37.4% of respondents agreed that they expected stock prices to rise in the coming year. Consumer sentiment reports are based on surveys of consumers, which normally might be safely ignored, but in the case of recession, a plurality of shoppers expecting things to get worse can make it so just by buying less.
FYI – The University of Michigan measures consumer sentiment while the Conference Board measures consumer confidence. Often confused, they use different metrics to describe similar attitudes. In this case, the consumer confidence reading is down 20 points since the November election, to a level of 92.9 in March.
No markets like uncertainty, except perhaps the VIX indicator, which measures volatility. But stock markets don’t like uncertainty, and will generally fall when things are at sixes and sevens. And bond markets don’t like uncertainty and will generally rise when things are unsure, making bond buyers pay more for the same interest payments. You will not be surprised to find that stocks fell last week, especially on Friday, and bond yields also slid (meaning bond prices rose). We can adjust to whatever is happening, but it’s harder when what’s happening keeps changing.
As I have mentioned, for many of our clients we are suggesting adequate cash reserves, bond-ladder back-ups, and rebalancing to value stocks and international companies. This advice is not suitable for everyone, so if you would like more personal recommendations, please give us a call at Diastole: (203) 458-5220.
One thing we will probably not recommend is a new Harley-Davidson motorcycle. A proposed EU tariff could lift European Harley prices from $28,000 in the U.S. to $77,000 in Denmark. If a retaliatory tariff is imposed, the price of the motorcycle in Denmark might as high as $124,000. Imagine what it would cost if it had four wheels!
For the week ending on March 28th, the Standard & Poor’s 500 finished at 5,580, the Nasdaq Composite Index at 17,322, and the Dow Jones Industrial Average at 41,583. The yield on the ten-year Treasury Note closed at 4.255%. U.S. crude oil cost $69.45 per barrel, N.Y. gold cost $3,084.70 per ounce, and one Euro was worth $1.08.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here was gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Axios, Bloomberg, Business Insider, CNN, CNBC, Reuters, The Associated Press, 1440 Digest, The Wall Street Journal, The Washington Post, The New York Times, USA Today, The Hustle, Morning Brew, and NBC News. If you have questions, please call us at (203) 458-5220, or reply to this email to reach me, Liz Cook.
Feeling down? Maybe one of your nice friends will send you an Edible Arrangement, full of fresh fruit, chocolate covered strawberries, and edibles(?)! The parent company of Edible Arrangements, conveniently called Edibles Brands, is branching out into hemp-based THC products including beverages, gummies, and other “enhancers”. They’re starting in the Southeast US and then branching out. Now that’s what I call interesting.