Macro thread - Why is the market up/down?

[rogermunibond]

GS economics team

 

— Larger tariffs will give a larger boost to consumer prices. In the absence of tariffs, we would have expected year-on-year core PCE inflation to fall from 2.65% in January to 2.1% by December 2025. Under our previous tariff assumptions, we expected core PCE inflation to remain in the mid-2s for the rest of the year. Our new tariff assumptions imply that it will instead rise a bit and peak at about 3% year-on-year, and in the risk scenario it would peak at around 3.3%.

 

— Larger tariffs are also likely to hit GDP harder through their tax-like effect on disposable income and consumer spending and their effect on financial conditions and uncertainty for businesses. While our previous tariff assumptions implied a peak hit to year-on-year GDP growth of -0.3pp, our new assumptions imply a peak hit of -0.8pp. In the risk scenario, this would grow to -1.3pp.

 

— Taking on board this additional 0.5pp drag on growth from our new larger tariff assumptions, we have reduced our 2025 Q4/Q4 GDP growth forecast to 1.7%, from 2.2% previously. This implies that GDP growth will be slightly below potential rather than slightly above. We have bumped up our unemployment rate forecast by 0.1pp to 4.2% in response.

 

— We have also raised our 12-month recession probability slightly from 15% to 20%. We have raised it by only a limited amount at this point because we see policy changes as the key risk, and the White House has the option to pull back if the downside risks begin to look more serious. If policy headed in the direction of our risk scenario or if the White House remained committed to its policies even in the face of much worse data, recession risk would rise further.

[Sweet]

My portfolio has been blasted these last couple of weeks.  Some stocks down 25%.  Luckily I was sitting in a lot of crash but still, it hurts.

[Viking]

My view has been that the US - with Trump as president - is engaging in a big science experiment. Not as substantial as Argentina; but there are parallels. The first couple of months has been the Disney phase - lots of talk/actions (and bravado). In recent weeks we are getting to the consequences phase (likely just the start). 
 

We are taught that financial markets do not like uncertainty/volatility. Actually it’s worse than that - they HATE uncertainty/volatility. And today, with a pyromaniac in charge, we are now starting to get see some of the fireworks (and they are ‘big’ and ‘beautiful’.) 
 

Trump is now trying to shift the narrative - ‘no pain, no gain.’ What do US consumers think? Sentiment surveys are not moving higher - in fact it is quite the opposite. Like the stock market today, my guess is US consumers are not thrilled about losing their job because President Trump thinks its a good idea. If US consumers pull back, the US economy will be in deep shit. 
 

Slowing business spending at the same time consumers are pulling back? Not good for the US economy.
 

Actions have consequences. Parents try to teach their kids this universal truth - so they don’t have to learn things the hard way. So I continue to watch Trump with great interest. Americans want someone who will burn things down. Well, Wall Street is burning today. I look forward to capitalizing on the consequences of Trump and his words/actions (groceries are getting put on sale). 

Edited Monday at 07:31 PM by Viking

[73 Reds]

44 minutes ago, Viking said:

My view has been that the US - with Trump as president - is engaging in a big science experiment. Not as substantial as Argentina; but there are parallels. The first couple of months has been the Disney phase - lots of talk/actions (and bravado). In recent weeks we are getting to the consequences phase (likely just the start). 
 

We are taught that financial markets do not like uncertainty/volatility. Actually it’s worse than that - they HATE uncertainty/volatility. And today, with a pyromaniac in charge, we are now starting to get see some of the fireworks (and they are ‘big’ and ‘beautiful’.) 
 

Trump is now trying to shift the narrative - ‘no pain, no gain.’ What do US consumers think? Sentiment surveys are not moving higher - in fact it is quite the opposite. Like the stock market today, my guess is US consumers are not thrilled about losing their job because President Trump thinks its a good idea. If US consumers pull back, the US economy will be in deep shit. 
 

Slowing business spending at the same time consumers are pulling back? Not good for the US economy.
 

Actions have consequences. Parents try to teach their kids this universal truth - so they don’t have to learn things the hard way. So I continue to watch Trump with great interest. Americans want someone who will burn things down. Well, Wall Street is burning today. I look forward to capitalizing on the consequences of Trump and his words/actions (groceries are getting put on sale). 

@Viking, I mostly agree with a few caveats.  We live in a society focused on instant gratification, news and results.  Work like yours with Fairfax goes largely unnoticed (except on this forum) because it required patience and time for the story to play out.  All of "The sky is falling in" crowd, whether in the US., Canada or anywhere else seems to ignore the fact that nothing Trump is doing now is irreversible.  Much of Trump's agenda is indeed like a science experiment.  In order to perform an experiment you've got to try something new.   Voters in the US voted for that.  I have yet to see Trump do anything since inauguration day that he didn't campaign on and promise to do.  Yet even here folks seem overly surprised, even shocked when it happens.  Much of the "science experiment" takes a lot longer than a matter of weeks before any conclusions can be drawn.  Yet the same folks continue to voice the same complaints without a bit of evidence whether some of these new policies will ultimately be effective and most importantly, satisfactory to the folks who voted for such changes.  No one ever suggested that some of these changes would be universally liked by our friends and neighbors, nor would they be permanent once the objectives for such changes have been met.  Frankly, as a US citizen I think most of the "ends" are admirable, while the means can be quite bumpy or worse.  I don't know any better than you do whether the science experiment will be successful but I did vote for change and like you, will watch with an eye toward the future but well beyond tomorrow or next week before passing judgment.      

[nsx5200]

I don't mind the experiment, but would like there to be a bit more transparency.  If he's aiming to tank the market for the long-term greater good, just come out and say so.  If it doesn't work, I would want him to step up and say so.  If it does work, I don't mind him claiming all the credit.  Instead of doing stuff without stating the bigger picture is more disruptive than it really needs to be.

 

Volcker's actions was probably just as experimental back then, but at least he was as transparent as it was going to get, with publicly announced end-goals.  The criticism I have with the current administration is that there's not that level of transparency about the grand scheme, and it forces everybody to wonder if it's intentional, or accidental.  The motivation for why that's done becomes political and speculative, and I rather not step into that.

[Gregmal]

4 minutes ago, nsx5200 said:

I don't mind the experiment, but would like there to be a bit more transparency.  If he's aiming to tank the market for the long-term greater good, just come out and say so.  If it doesn't work, I would want him to step up and say so

Eh that's not how negotiating works. 

 

His problems are also amplified by folks, whom take stuff out of context deliberately, or conclude things like a plane crash 2 days into his term or stock market gyrations and recessions are the cause of his not even implemented yet policies. I say let him have some time, and let the babies be babies. Again, we're talking about people whom can't cheer for a 13 year old cancer survivor. 

Edited Monday at 08:49 PM by Gregmal

[Gregmal]

Anyway, just realized this isn't a "politics" tagged thread, so Im done discussing it. Per usual it comes up and all sorts of insinuations are made and then I respond in good faith and I'll get the scolding for apparently starting it. 

[kh812000]

47 minutes ago, nsx5200 said:

I don't mind the experiment, but would like there to be a bit more transparency.  If he's aiming to tank the market for the long-term greater good, just come out and say so.  If it doesn't work, I would want him to step up and say so.  If it does work, I don't mind him claiming all the credit.  Instead of doing stuff without stating the bigger picture is more disruptive than it really needs to be.

 

Volcker's actions was probably just as experimental back then, but at least he was as transparent as it was going to get, with publicly announced end-goals.  The criticism I have with the current administration is that there's not that level of transparency about the grand scheme, and it forces everybody to wonder if it's intentional, or accidental.  The motivation for why that's done becomes political and speculative, and I rather not step into that.

 

 

This is the first time we’ve had an administration pretty much say with a straight face that the objectives are going to cause short term pain. 

To me this is as transparent as you can you get.  

 

 

[backtothebeach]

Politics aside, these stocks made 52 week highs today. IBM??

 

AbbVie Inc.

Altria Group Inc.

AutoZone Inc.

Berry Global Group Inc.

Bristol Myers Squibb Co.

Brown & Brown Inc.

International Business Machines Corp.

Kimberly-Clark Corp.

Kroger Co.

McCormick & Co. Inc.

McDonald's Corp.

McKesson Corp.

Medtronic PLC

Quest Diagnostics Inc.

Tootsie Roll Industries Inc.

Verizon Communications Inc.

W. P. Carey Inc.

 

 

[Gregmal]

[Paarslaars]

Still wondering why the FED is so reluctant to lower rates while the ECB continues to do so.

Sure inflation is a tad lower but that was the case during the rate hikes as well...

[Dalal.Holdings]

It’s going to take a lot of lessons for the dip buyers to learn.

 

Ya’ll tempted the bear with Mag 7, MSTR, crypto and now the bear will show no mercy.

 

It got so crazy that Europeans and Asians were pouring their money into overpriced U.S. equities and other garbage…

[nsx5200]

18 hours ago, kh812000 said:

This is the first time we’ve had an administration pretty much say with a straight face that the objectives are going to cause short term pain. 

To me this is as transparent as you can you get.  

Very fair.  The idea of imposing tariff to bring jobs back is an idea worthy of a try.  I wish it were a bit more focused in scope and goal as a start, but that's just nit-picking.  My mental and financial tolerance for a longer science experiment is probably a lot higher than what the general populous can tolerate, and for the experiment to work in earnest, I sincerely do hope the current administration can communicate that well enough so most will get on-board(there doesn't seem like any other choice now...), at least until we have a fairly good idea whether it'll work or not.

 

@Dalal.Holdings, welcome back!

[LC]

4 minutes ago, nsx5200 said:

The idea of imposing tariff to bring jobs back is an idea worthy of a try

 

It was explored way back in the days of Adam Smith.

[rogermunibond]

Eh gads.  Learn economic history.

 

Calling this a "science experiment" is much too kind.

 

Trade wars overall lower GDP of all nations involved.

 

Greg Mankiw has been blasting Kevin Hassett for spouting economic nonsense.

 

https://gregmankiw.blogspot.com/2025/03/kevin-hassett-forgets-econ-101.html

[dwy000]

13 minutes ago, LC said:

 

It was explored way back in the days of Adam Smith.

It only works if the tarriffs are for decades not hours. Building new industrial capacity takes $bns and years. Who is doing that when the situation is likely to change the next day based upon someone's tweet. 

 

[rogermunibond]

Some common sense discussion on trades and tariffs.  AEI, thank god, unlike Heritage, hasn't drunk the Kool-Aid.

 

https://www.aei.org/wp-content/uploads/2014/04/-three-simple-principles-of-trade-policy_142937157317.pdf

[Gregmal]

8 minutes ago, dwy000 said:

It only works if the tarriffs are for decades not hours. Building new industrial capacity takes $bns and years. Who is doing that when the situation is likely to change the next day based upon someone's tweet. 

 

Or, best case scenario when things are ripped up and reversed the same as what just happened here after the past 4 years. This is why the system is broken and unfixable.

[Hektor]

32 minutes ago, LC said:

It was explored way back in the days of Adam Smith.

 

17 minutes ago, dwy000 said:

It only works if the tarriffs are for decades not hours. Building new industrial capacity takes $bns and years.

 

An explanation of why it doesn't work

 

[Spooky]

34 minutes ago, Gregmal said:

This is why the system is broken and unfixable.

 

Is it though? Since world war II the current US and global economic system has created untold amounts of wealth and prosperity.

[Gregmal]

14 minutes ago, Spooky said:

 

Is it though? Since world war II the current US and global economic system has created untold amounts of wealth and prosperity.

Only if you consider the acceleration of wealth inequality and inflation outstripping wage growth as working. 

[dwy000]

50 minutes ago, Gregmal said:

Only if you consider the acceleration of wealth inequality and inflation outstripping wage growth as working. 

Wage growth considerably outstrips inflation and has for decades.

 

The Growth in Real Wages, by Income Group - Voronoi

[Gregmal]

1 minute ago, dwy000 said:

Wage growth considerably outstrips inflation and has for decades.

 

The Growth in Real Wages, by Income Group - Voronoi

Isn’t this kinda evidence of the wealth inequality thing. Wage growth for the majority of the country certainly hasn’t kept up with inflation. 
 

Also interesting 

 

 

• During the pandemic, real wages grew the fastest across low-income workers, rising by a cumulative 12.1% between 2019 and 2023

 

Which hilariously enough was the previous administration and Jerome Powells mission to stop such events from continuing lmfao. The smarty pants considered this a “problem”. Back to normal it seems.

[Blugolds]

6 minutes ago, dwy000 said:

Wage growth considerably outstrips inflation and has for decades.

 

The Growth in Real Wages, by Income Group - Voronoi

 

https://www.epi.org/publication/charting-wage-stagnation/

[dwy000]

3 minutes ago, Gregmal said:

Isn’t this kinda evidence of the wealth inequality thing. Wage growth for the majority of the country certainly hasn’t kept up with inflation. 
 

Also interesting 

 

 

• During the pandemic, real wages grew the fastest across low-income workers, rising by a cumulative 12.1% between 2019 and 2023

 

Which hilariously enough was the previous administration and Jerome Powells mission to stop such events from continuing lmfao. The smarty pants considered this a “problem”. Back to normal it seems.

inequality is a different issue.  And that generally gets addressed through taxes and social spending - the exact things that are being reversed. 

 

But the comment that wages have trailed inflation (for any income group going back decades) is simply not true.