It's a Mess Out There as Stagflation Worries Start to Take Hold
Tariff confusion and economic concerns are putting more pressure on stocks.
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Stocks rebounded on Wednesday on news that some auto-related tariffs are being delayed for a month, but the relief didn’t last for long. Markets are giving back all the gains in early action on Thursday as concerns grow about mediocre earnings from Marvell Technology MRVL and the potential for stagflation.
Interest rates are rising, but there are also concerns about slowing economic growth. This combination, which is known as stagflation, is a particularly difficult situation for the Fed, which is faced with the dilemma of cutting rates that will boost growth but also have the tendency to increase inflationary pressures.
President Trump’s focus on tariffs is creating tremendous uncertainty. There was some hope that the tariffs would just be a negotiating tool, but now that some of the tariffs are going into effect there are real consequences.
Domestic automakers in the U.S. were able to have tariffs pushed back for 30 days to give them some time to transfer production from Canada to the U.S., but that is a giant undertaking that will take much longer than 30 days to accomplish.
Meanwhile, investors are dealing with more pressure on the AI theme because of the Marvell earnings report, and there are now building concerns about a recession. At the same time, interest rates are seeing some upside pressure.
These issues are reflected in the charts, which have been breaking down since February 19. There was a relief bounce on Wednesday that gave the bulls some hope, but it will likely be sold aggressively on Thursday.
The risk is to the downside and there is no choice but to stay patient and see if the charts can find some support. The biggest problem is that there is so much uncertainty that it is difficult for stocks to discount the poor economic and tariff news. There is no way to know what policy changes will be made next, and that makes it very hard to price stocks efficiently.
My plan is to stay patient, watch the charts, and wait for some stronger support to form before putting more cash to work.
At the time of publication, Rev Shark had no positions in any securities mentioned.
