📉 The stock market tumbled, with the S&P 500 falling 9.1% last week to close at 5,074.08. It’s now down 17.4% from its February 19 closing high of 6,144.15 and up 41.9% from its October 12, 2022 closing low of 3,577.03. For more on market moves, read: Investing in the stock market is an unpleasant process 📉
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It’s been a challenging few days.
There’s been a mountain of news about the direction of global trade policy, which has been followed by a tsunami of research and insights intended to help investors make sense of it all.
I’ve spent a ton of time sifting through much of it, and I’ve concluded: It is impossible to know what will happen next.
While everyone agrees that the announced tariffs are negative at least in the near-term, the range of potential outcomes is very wide and impossible to define precisely. Not only are the indirect effects hard to capture, the uncertainty is heightened by the possibility that at least some of the tariffs are short-lived or negotiated lower.
Consequently, I’d caution against listening to folks who have a high degree of confidence in the particular outcome they’re touting. There are just too many unknowns to be able to model a clean forecast.
A couple of analysts I follow had some particularly insightful commentary on the murky state of things.
“There is no tariff playbook,” BofA’s Savita Subramanian wrote on Thursday. “Known unknowns are plentiful.” From her note:
Investors looking for historical parallels are faced with scant observations from incomparable eras (e.g., 1930s Smoot Hawley ended badly). Import/export exposure by company is difficult to estimate and not regularly disclosed. Full supply chains are hard to figure out. Secondary impacts are even hazier: prolonged negotiations could stall activity spiraling into a recession. Calls to boycott U.S. goods could ramp further. But pricing power and currency moves can mollify tariff impacts. Ex-U.S. multinationals can avoid tariffs (and maybe enjoy lower corporate tax rates) by expanding U.S. footprint. Our constructive equity outlook relies on at least partial resolution from which corporates can plan and grow by early 2H25, as capacity buildouts are multi-quarter phenomena.
Among the many challenges in analyzing the impact on the stock market is the fact that regulations don’t require publicly-traded companies to disclose many details about their overseas exposure. This is something I’ve mentioned in past discussions about S&P 500 revenues generated outside of the U.S.
To Subramanian’s point about boycotts, earlier this week Goldman Sachs economists also highlighted the challenges in estimating the magnitude of this second order effect.
Subramanian estimates that the impact of tariffs could drag S&P 500 earnings per share (EPS) by 5% to 32%. Yes, that’s a wide range. And even she acknowledges that it’s derived from an “oversimplified scenario analysis.”
On Bloomberg Radio on Friday, Renaissance Macro’s Neil Dutta addressed the shock to GDP that economists have been estimating as a result of the announced tariffs. He too cautioned: “These calculations understate the hit to some extent, because you’re just looking at direct costs. You’re not including, ‘What are the ramifications to corporate confidence? Household confidence?’ The spillover and knock-on effects. I think that’s why I think it can be even worse.”
In terms of modeling how the ongoing trade war will unfold, Dutta added: “We’re all just guessing at this point.”
Oaktree Capital’s Howard Marks, also speaking to Bloomberg on Friday, said: “The world economy and the world order beyond the economy — meaning geopolitics and international relationships — has been shook up like a snow globe by the events of the last days, and nobody knows what it’s going to look like.”
“Today, whatever your forecast may be, you have to say the probability that I’m right is lower than ever,” Marks added. “Because the probability that we know what the future is going to look like is lower than ever.”
While uncertainty and market volatility may be elevated in the near term, experts generally agree that stocks continue to be attractive for long-term investors. It’s just that the near future has become very difficult to predict.
It’s times like these where the best move is to stick to your financial plan, which hopefully takes into consideration periods of high volatility and uncertainty.
If there’s any good news, the first quarter just ended. This means we’ll soon be in earnings season, when companies will give more color on what they see and where they expect things to head.
This could be productive, because so far we haven’t heard much about how tariffs may impact earnings. Here’s what RBC’s Lori Calvasina had to say in her research note on Wednesday:
We’ve been reading earnings call and conference transcripts closely since November across market capitalizations, sectors, and industries and feel fairly confident in saying that U.S. public companies have been very reluctant to discuss tariff impacts (outside of China) until specific details have been provided by the administration, and even then, many still have not given sell-side analysts a lot of specifics to start factoring into their models. The incremental information provided Wednesday (we hope) will enable sell-side analysts to push companies a bit harder to get the conversation going about these policies. This is important, because for U.S. equities to put in a durable bottom, EPS forecasts need to be adjusted which in turn will give investors confidence to assess valuations and make decisions about when opportunity has been unlocked in certain corners of the U.S. equity market.
“Like most analysts and strategists, we’ll be digesting the implications of the newly announced reciprocal tariffs in the coming days,” Calvasina wrote.
All eyes and ears will be on Corporate America in the coming weeks as earnings season picks up.
Will we get more clarity? Or will we learn they have no clue where things are headed either?
As always, keep your stock market seat belts fastened. Investing in the stock market is an unpleasant process.
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Related from TKer:
I was on The Long Term Investor podcast with Plancorp CIO Peter Lazaroff. We talked about TKer’s 10 Truths About The Stock Market and how investors can use them to make sense about markets today. Listen on Apple Podcasts, Spotify, YouTube, and beyond!
There were several notable data points and macroeconomic developments since our last review:
👍 The labor market continues to add jobs. According to the BLS’s Employment Situation report released Friday, U.S. employers added 228,000 jobs in February. The report reflected the 51st straight month of gains, reaffirming an economy with growing demand for labor.
(Source: BLS via FRED)
Total payroll employment is at a record 159.4 million jobs, up 7.1 million from the prepandemic high.
(Source: BLS via FRED)
The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — ticked up to 4.2% during the month. While it continues to hover near 50-year lows, the metric is near its highest level since November 2021.
(Source: BLS via FRED)
While the major metrics continue to reflect job growth and low unemployment, the labor market isn’t as hot as it used to be.
For more on the labor market, read: The labor market is cooling 💼 and 9 once-hot economic charts that cooled 📉
💸 Wage growth ticks higher. Average hourly earnings rose by 0.3% month-over-month in March, up from the 0.2% pace in February. On a year-over-year basis, this metric is up 3.8%.
(Source: BLS via FRED)
For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fed’s war on inflation 📈
💼 Job openings fall. According to the BLS’s Job Openings and Labor Turnover Survey, employers had 7.57 million job openings in February, down from 8.76 million in January.
(Source: BLS via FRED)
During the period, there were 7.05 million unemployed people — meaning there were 1.07 job openings per unemployed person. This continues to be one of the more obvious signs of excess demand for labor. However, this metric has returned to prepandemic levels.
(Source: BLS via FRED)
For more on job openings, read: Were there really twice as many job openings as unemployed people? 🤨 and Revisiting the key chart to watch amid the Fed’s war on inflation 📈
👍 Layoffs remain depressed, hiring remains firm. Employers laid off 1.79 million people in February. While challenging for all those affected, this figure represents just 1.1% of total employment. This metric remains at prepandemic levels.
(Source: BLS via FRED)
For more on layoffs, read: Every macro layoffs discussion should start with this key metric 📊
Hiring activity continues to be much higher than layoff activity. During the month, employers hired 5.4 million people.
(Source: BLS via FRED)
That said, the hiring rate — the number of hires as a percentage of the employed workforce — has been trending lower, which could be a sign of trouble to come in the labor market.
(Source: BLS via FRED)
For more on why this metric matters, read: The hiring situation 🧩
🤔 People are quitting less. In February, 3.2 million workers quit their jobs. This represents 2% of the workforce. While the rate is above recent lows, it continues to trend below prepandemic levels.
(Source: BLS via FRED)
A low quits rate could mean a number of things: more people are satisfied with their job; workers have fewer outside job opportunities; wage growth is cooling; productivity will improve as fewer people are entering new unfamiliar roles.
For more, read: Promising signs for productivity ⚙️
📈 Job switchers still get better pay. According to ADP, which tracks private payrolls and employs a different methodology than the BLS, annual pay growth in March for people who changed jobs was up 6.5% from a year ago. For those who stayed at their job, pay growth was 4.6%.
(Source: ADP)
For more on why policymakers are watching wage growth, read: Revisiting the key chart to watch amid the Fed’s war on inflation 📈
💼 Unemployment claims tick lower. Initial claims for unemployment benefits declined to 219,000 during the week ending March 29, down from 225,000 the week prior. This metric continues to be at levels historically associated with economic growth.
(Source: DoL via FRED)
For more context, read: A note about federal layoffs 🏛️ and The labor market is cooling 💼
💳 Card spending data is holding up. From JPMorgan: “As of 28 Mar 2025, our Chase Consumer Card spending data (unadjusted) was 1.5% above the same day last year. Based on the Chase Consumer Card data through 28 Mar 2025, our estimate of the US Census March control measure of retail sales m/m is 0.41%.”
(Source: JPMorgan)
From BofA: “Total card spending per HH was up 0.1% y/y in the week ending Mar 29, according to BAC aggregated credit & debit card data. The slowdown relative to last week was likely due to unfavorable base effects from Good Friday timing (3/29/24 vs 4/18/25). Total card spending growth in the DC area remains weaker than the rest of the country, likely due to the impact of DOGE cuts.“
(Source: BofA)
For more on the consumer, read: Americans have money, and they’re spending it 🛍️
⛽️ Gas prices tick higher. From AAA: “Gas prices made a bigger jump this past week, with the national average for a gallon of regular going up by more than 10 cents to $3.26. Several factors are driving the increase, including refinery maintenance and summer-blend gasoline switch. The last time the national average reached $3.26 was back in September, consistent with seasonal shifts, but current prices remain below what they were this time last year.”
(Source: AAA)
For more on energy prices, read: Higher oil prices meant something different in the past 🛢️
🏠 Mortgage rates tick lower. According to Freddie Mac, the average 30-year fixed-rate mortgage declined to 6.64% from 6.65% last week. From Freddie Mac: “Over the last month, the 30-year fixed-rate has settled in, making only slight moves in either direction. This stability is reassuring, and borrowers have responded with purchase application demand rising to the highest growth rate since late last year.”
(Source: Freddie Mac)
There are 147.4 million housing units in the U.S., of which 86.9 million are owner-occupied and about 34.1 million of which are mortgage-free. Of those carrying mortgage debt, almost all have fixed-rate mortgages, and most of those mortgages have rates that were locked in before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.
For more on mortgages and home prices, read: Why home prices and rents are creating all sorts of confusion about inflation 😖
🏢 Offices remain relatively empty. From Kastle Systems: “Peak day office occupancy was 63.1% on Tuesday last week, up two tenths of a point from the previous week. In Austin, the South by Southwest conference and festival led to lower daily occupancy nearly every day. And in Houston, CERAWeek 2025 resulted in significantly lower occupancy last Thursday and Friday before rebounding after the conference, peaking at 71.2% on Tuesday. The 10-city average low was on Friday at 34.3%, down 2.1 points from last week.”
(Source: Kastle)
For more on office occupancy, read: This stat about offices reminds us things are far from normal 🏢
👎 Manufacturing surveys deteriorate. From S&P Global’s March U.S. Manufacturing PMI: “A key concern among manufacturers is the degree to which heightened uncertainty resulting from government policy changes, notably in relation to tariffs, causes customers to cancel or delay spending, and the extent to which costs are rising and supply chains deteriorating in this environment. Tariffs were the most cited cause of factory input costs rising in March, and at a rate not seen since mid-2022 during the pandemic-related supply shock. Supply chains are also suffering to a degree not seen since October 2022 as delivery delays become more widespread.”
(Source: S&P Global)
The ISM Manufacturing PMI also deteriorated, signaling contraction in the industry.
(Source: ISM)
Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than actual hard data.
For more on this, read: What businesses do > what businesses say 🙊
🤷 Services surveys are mixed. From S&P Global’s March Services PMI: “March saw a welcome rebound in service sector business activity after a weak start to the year, with employment also returning to growth after a decline seen in February. However, the rate of expansion remains below that seen throughout the second half of last year. Combined with a weak manufacturing reading for March, the survey data point to GDP having risen at an annualized rate of just 1.5% in the first quarter, down sharply from the 2.4% rate seen at the end of last year.“
(Source: S&P Global)
Meanwhile, the ISM Services PMI cooled in March.
(Source: ISM)
🔨 Construction spending ticks higher. Construction spending increased 0.7% to an annual rate of $2.2 trillion in February.
(Source: Census)
🏭 Business investment activity ticks lower. Orders for nondefense capital goods excluding aircraft — a.k.a. core capex or business investment — declined 0.2% to $75.13 billion in February.
(Source: Census via FRED)
Core capex orders are a leading indicator, meaning they foretell economic activity down the road. The growth rate had leveled off a bit, but they’ve perked up in recent months. However, economists caution that this may reflect a pull forward in sales ahead of new tariffs.
For more on core capex, read: A BIG economic question right now 🤔 and 9 once-hot economic charts that cooled 📉
🇺🇸 Most U.S. states are still growing. From the Philly Fed’s January State Coincident Indexes report: “Over the past three months, the indexes increased in 47 states, decreased in one state, and remained stable in two, for a three-month diffusion index of 92. Additionally, in the past month, the indexes increased in 35 states, decreased in nine states, and remained stable in six, for a one-month diffusion index of 52.”
(Source: Philly Fed)
📉 Near-term GDP growth estimates are tracking negative. The Atlanta Fed’s GDPNow model sees real GDP growth declining at a 2.8% rate in Q1. Adjusted for the impact of gold imports and exports, they see GDP falling at a 0.8% rate.
(Source: Atlanta Fed)
For more on the economy, read: 9 once-hot economic charts that cooled 📉
🚨 The tariffs announced by President Trump as they stand threaten to upend global trade with significant implications for the U.S. economy, corporate earnings, and the stock market. Until we get some more clarity, here’s where things stand:
Earnings look bullish: The long-term outlook for the stock market remains favorable, bolstered by expectations for years of earnings growth. And earnings are the most important driver of stock prices.
Demand is positive: Demand for goods and services remains positive, supported by healthy consumer and business balance sheets. Job creation, while cooling, also remains positive, and the Federal Reserve — having resolved the inflation crisis — has shifted its focus toward supporting the labor market.
But growth is cooling: While the economy remains healthy, growth has normalized from much hotter levels earlier in the cycle. The economy is less “coiled” these days as major tailwinds like excess job openings have faded. It has become harder to argue that growth is destiny.
Actions speak louder than words: We are in an odd period given that the hard economic data has decoupled from the soft sentiment-oriented data. Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, what matters is that the hard economic data continues to hold up.
Stocks are not the economy: Analysts expect the U.S. stock market could outperform the U.S. economy, thanks largely due to positive operating leverage. Since the pandemic, companies have adjusted their cost structures aggressively. This has come with strategic layoffs and investment in new equipment, including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is translating to robust earnings growth.
Mind the ever-present risks: Of course, this does not mean we should get complacent. There will always be risks to worry about — such as U.S. political uncertainty, geopolitical turmoil, energy price volatility, cyber attacks, etc. There are also the dreaded unknowns. Any of these risks can flare up and spark short-term volatility in the markets.
Investing is never a smooth ride: There’s also the harsh reality that economic recessions and bear markets are developments that all long-term investors should expect to experience as they build wealth in the markets. Always keep your stock market seat belts fastened.
Think long term: For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. The long game remains undefeated, and it’s a streak long-term investors can expect to continue.
For more on how the macro story is evolving, check out the previous review of the macro crosscurrents »
Here’s a roundup of some of TKer’s most talked-about paid and free newsletters about the stock market. All of the headlines are hyperlinked to the archived pieces.
The stock market can be an intimidating place: It’s real money on the line, there’s an overwhelming amount of information, and people have lost fortunes in it very quickly. But it’s also a place where thoughtful investors have long accumulated a lot of wealth. The primary difference between those two outlooks is related to misconceptions about the stock market that can lead people to make poor investment decisions.
Passive investing is a concept usually associated with buying and holding a fund that tracks an index. And no passive investment strategy has attracted as much attention as buying an S&P 500 index fund. However, the S&P 500 — an index of 500 of the largest U.S. companies — is anything but a static set of 500 stocks.
(Source: S&P Dow Jones indices via TKer)
For investors, anything you can ever learn about a company matters only if it also tells you something about earnings. That’s because long-term moves in a stock can ultimately be explained by the underlying company’s earnings, expectations for earnings, and uncertainty about those expectations for earnings. Over time, the relationship between stock prices and earnings have a very tight statistical relationship.
(Source: Fidelity via TKer)
Investors should always be mentally prepared for some big sell-offs in the stock market. It’s part of the deal when you invest in an asset class that is sensitive to the constant flow of good and bad news. Since 1950, the S&P 500 has seen an average annual max drawdown (i.e., the biggest intra-year sell-off) of 14%.
Every recession in history was different. And the range of stock performance around them varied greatly. There are two things worth noting. First, recessions have always been accompanied by a significant drawdown in stock prices. Second, the stock market bottomed and inflected upward long before recessions ended.
(Source: Goldman Sachs via TKer)
Since 1928, the S&P 500 generated a positive total return more than 89% of the time over all five-year periods. Those are pretty good odds. When you extend the timeframe to 20 years, you’ll see that there’s never been a period where the S&P 500 didn’t generate a positive return.
(Source: @BespokeInvest)
While a strong dollar may be great news for Americans vacationing abroad and U.S. businesses importing goods from overseas, it’s a headwind for multinational U.S.-based corporations doing business in non-U.S. markets.
(Source: FactSet via TKer)
The stock market sorta reflects the economy. But also, not really. The S&P 500 is more about the manufacture and sale of goods. U.S. GDP is more about providing services.
(Source: BlackRock via TKer)
…you don’t want to buy them when earnings are great, because what are they doing when their earnings are great? They go out and expand capacity. Three or four years later, there’s overcapacity and they’re losing money. What about when they’re losing money? Well, then they’ve stopped building capacity. So three or four years later, capacity will have shrunk and their profit margins will be way up. So, you always have to sort of imagine the world the way it’s going to be in 18 to 24 months as opposed to now. If you buy it now, you’re buying into every single fad every single moment. Whereas if you envision the future, you’re trying to imagine how that might be reflected differently in security prices.
Some event will come out of left field, and the market will go down, or the market will go up. Volatility will occur. Markets will continue to have these ups and downs. … Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years… The next 500 points, the next 600 points — I don’t know which way they’ll go… They’ll double again in eight or nine years after that. Because profits go up 8% a year, and stocks will follow. That’s all there is to it.
Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars, but not the madness of men.” If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.
According to S&P Dow Jones Indices (SPDJI), 65% of U.S. large-cap equity fund managers underperformed the S&P 500 in 2024. As you stretch the time horizon, the numbers get even more dismal. Over a three-year period, 85% underperformed. Over a 10-year period, 90% underperformed. And over a 20-year period, 92% underperformed. This 2023 performance follows 14 consecutive years in which the majority of fund managers in this category have lagged the index.
(Source: SPDJI via TKer)
S&P Dow Jones Indices found that funds beat their benchmark in a given year are rarely able to continue outperforming in subsequent years. For example, 334 large-cap equity funds were in the top half of performance in 2021. Of those funds, 58.7% came in the top half again in 2022. But just 6.9% were able to extend that streak through 2023. If you set the bar even higher and consider those in the top quartile of performance, just 20.1% of 164 large-cap funds remained in the top quartile in 2022. No large-cap funds were able to stay in the top quartile for the three consecutive years ending in 2023.
(Source: SPDJI via TKer)
Picking stocks in an attempt to beat market averages is an incredibly challenging and sometimes money-losing effort. In fact, most professional stock pickers aren’t able to do this on a consistent basis. One of the reasons for this is that most stocks don’t deliver above-average returns. According to S&P Dow Jones Indices, only 24% of the stocks in the S&P 500 outperformed the average stock’s return from 2000 to 2022. Over this period, the average return on an S&P 500 stock was 390%, while the median stock rose by just 93%.
(Source: SPDJI via TKer)
