Volatile Policy, Volatile Markets

The market may be recalibrating

Summary: Capital markets have hit a patch of volatility thanks in large part to volatile policy shifts from the Trump administration. When things change in an instant, it makes it hard to plan for the longer term. Confidence appears to be thinning among both business leaders and consumers. Meanwhile, Jerome Powell sees no reason to rush anything.

---

Editor’s Note: We have reserved the sections after Macro for our premium subscribers. If you’re not a premium subscriber already, please consider subscribing.

---

Macro

Volatile policy is creating volatile markets
"If you take two steps back, no one should panic. There is volatility in markets—markets go up and markets go down. And if you look at two of the key economic indicators, you look at the Dow and the S&P, those levels are still above pre-election levels. If I look at where both of those indices closed on election night, where they are today is still above. So you recall that there was a post-election euphoria, if you will, and now it appears that the market may be recalibrating." — NYSE Group (ICE 0.00%↑) President Lynn Martin

Businesses are becoming hesitant again
"Our customers really haven't moved off where they were in November and all honesty, which is the wait and see. They have a lot of optimism, there's a lot of pent-up demand so they're ready to get back to growing their business, investing in their business, but they're just unsure as to when to start. We think we have some certainty as to which way interest rates are going, probably less cuts this year and possibly some next year. Their biggest items that we hear consistently is tariffs. Tariffs are a huge impact for them, whether it's directly for their business or whether they want to do a construction project that requires them to import materials. The second one is immigration. What's the labor force going to look like? What's the impact going to be? And they're really looking for certainty on those 2. And then the third is the tax rollbacks. Everything points to the fact that the tax program will be extended, but they still want to see certainty on specifically those 3 things." — First Horizon (FHN 0.00%↑) CFO Hope Dmuchowski

Consumer spending has gotten off to a slow start to the year
"It's definitely been a slow start to the year. And so, some people are flagging weather as a possible driver of that, which I do think it is a driver to some extent. But all of us are watching consumer confidence and, ultimately, are we seeing potential for slower levels of demand because of concerns around the economy and maybe some concerns associated with the impact of tariffs?" — Stanley Black & Decker (SWK 0.00%↑) CEO Don Allan

Cooler heads are saying "take a long view"
"What I’d say is we try to take a little bit of a longer-term perspective—that there is tariff diplomacy going on, and that what is happening now could change depending on what market participants and government officials do. You’ve got to take that longer-term approach and hope or maybe expect at some point that they’ll get to outcomes, markets will calm, and actually, in a moment like this, you look around and say, ‘Are there good businesses that are now on sale where we can deploy capital into this volatility?’ So I would just say to investors—be a little bit patient here, let this tariff diplomacy play out a bit." — Blackstone (BX 0.00%↑) COO Jonathan Gray

But it's hard to plan for the long term
"One of the issues around the uncertainty of the tariffs is it’s very hard to make an investment decision even on something like a restart without knowing how long the tariffs will last. More broadly, the administration has asked us, are we likely to reshore aluminum production in the United States? We make decisions around aluminum production that are a horizon of 20 to 40 years. We would not be making an investment in the United States based on a tariff structure that could be in place for a much shorter period of time." — Alcoa (AA 0.00%↑) CEO William Oplinger

The Fed is not making things any easier
"We do not need to be in a hurry, and are well positioned to wait for greater clarity...The costs of being cautious are very, very low. The economy is fine. It doesn't need us to do anything really. We can wait, and we should wait." — Federal Reserve Chair Jerome Powell

Tariffs are driving inflation expectations up
"We pay close attention to a broad range of measures of inflation expectations, and some near-term measures have recently moved up. We see this in both market- and survey-based measures, and survey respondents, both consumers and businesses, are mentioning tariffs as a driving factor." — Federal Reserve Chair Jerome Powell

The Trump administration may be ok with a recession
"The market and the economy have become hooked, become addicted, to excessive government spending, and there’s going to be a detox period...Could we be seeing this economy that we inherited starting to roll a bit? Sure. Look, there’s going to be a natural adjustment as we move away from public spending." — US Treasury Secretary Scott Bessent

There's some fear that America could end up alone
"If we tear the world apart—I call it the economic battlefield—in trade, pricing, you know, us against Europe, us against China—yeah, we're going to have an issue. So, you know, America First is fine. America alone—if we end up alone because, you know, we're tearing the world asunder—we will have made a mistake." — JPMorgan (JPM 0.00%↑) CEO Jamie Dimon

International