Latest / Markets with Megan: A Quick Financial Markets Update / Impact Report: Tariff Turmoil | S2 E016 | 03-05-25

Transcript

Impact Report: Tariff Turmoil | S2 E016 | 03-05-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: It's Wednesday, march 5th, and we're coming to you today with an impact report.
• 0:04
  Megan Horneman: This is going to be our first impact report in the second season of Markets with Megan.
• 0:09
  Megan Horneman: It's a report to keep you more up to date on some of the headline news that's coming out, especially when we're seeing volatility in the market.
• 0:17
  Megan Horneman: Please, if you like this podcast, subscribe, hit the alarm bell, send it to friends or colleagues.
• 0:22
  Megan Horneman: But let's dig into what's impacting the markets right now.
• 0:26
  Megan Horneman: First of all, this has a lot to do with tariffs, so let's just do a very quick timeline where we are with tariffs.
• 0:33
  Megan Horneman: On February 1st, as campaigned and promised, president Trump put on tariffs or imposed tariffs on both Mexico, canada and China.
• 0:42
  Megan Horneman: This is because of their part with the immigration crisis, as well as the fentanyl crisis.
• 0:47
  Megan Horneman: Very quickly, mexico and Canada responded with willingness to work with the Trump administration, and there was a 30-day pause in this.
• 0:56
  Megan Horneman: Well, last Thursday, when Trump was asked about the negotiations going between Mexico and Canada, he said that at that point, the negotiations weren't nearly getting as far as he'd like and the tariffs were going into effect March 4.
• 1:11
  Megan Horneman: So now here we are, and the markets have been crazy for the past few days.
• 1:16
  Megan Horneman: Volatility has surged and where we are from the tariff perspective is that Mexico has, instead of implementing retaliatory tariffs, has said we'll have a call with Trump before we go forward with any retaliatory tariffs.
• 1:31
  Megan Horneman: Canada slapped yesterday with retaliatory tariffs and the market didn't like this.
• 1:36
  Megan Horneman: However, same thing Trudeau is expected to talk to the Trump administration in the coming days.
• 1:43
  Megan Horneman: China announced tariffs on agricultural goods that would start next week.
• 1:48
  Megan Horneman: So what's a little bit interesting here is some of these retaliatory tariffs.
• 1:53
  Megan Horneman: So Canada, for example, they said that they would start now with a small portion, but then the rest of it would go into effect later this month.
• 2:01
  Megan Horneman: So they're almost giving themselves a little leeway as well to try and push some of these negotiations forward.
• 2:07
  Megan Horneman: So why are we seeing volatility in the equity markets up 40% year-to-date?
• 2:13
  Megan Horneman: Obviously the tariffs, but it's not just the tariffs.
• 2:16
  Megan Horneman: Trump campaigned on making disruptions to how government's been operated.
• 2:21
  Megan Horneman: We've seen that with the DOGE Committee, and he was very adamant about laying the line when it comes to from the tariff perspective, so we knew he'd be a disruptor.
• 2:33
  Megan Horneman: I think what's surprising investors and causing the volatility is just at the speed at which that he is implementing so many changes.
• 2:40
  Megan Horneman: People don't like rapid changes and uncertainty and Trump's come in the first six weeks and implemented quite a bit from what he has campaigned on.
• 2:49
  Megan Horneman: The second thing is this is happening at the very same time that the economic data is weakening weak numbers.
• 2:55
  Megan Horneman: That's actually resulted in the Atlanta Federal Reserve to cut their GDP forecast for the first quarter down to minus 2.8%.
• 3:10
  Megan Horneman: It was as high as positive 3% just at the beginning of February.
• 3:15
  Megan Horneman: So you've got the Trump administration's policies.
• 3:18
  Megan Horneman: You have the slowing in economic growth.
• 3:21
  Megan Horneman: Valuations coming in this year were pricing in perfection.
• 3:25
  Megan Horneman: They weren't pricing in any of this uncertainty and we're seeing that valuations are starting to get a little bit more realistic, specifically in the equity market.
• 3:34
  Megan Horneman: We're also finally seeing that we're getting some realistic outlooks for earnings.
• 3:40
  Megan Horneman: So the S&P 500, for example, we've seen the earnings estimates come down by about 3% year to date.
• 3:46
  Megan Horneman: We still think there's more to that.
• 3:48
  Megan Horneman: So we're not advocating going in and buying aggressively in the S&P 500.
• 3:53
  Megan Horneman: Even though we have had a bit of a pullback still only about 5% pullback in the market.
• 4:00
  Megan Horneman: We think we'll get further downgrade there.
• 4:02
  Megan Horneman: But the earnings growth estimate for this year is now about 11% and that's going to be slightly lower than what the earnings growth was in 24, which was 15%.
• 4:13
  Megan Horneman: So what do we think going forward?
• 4:16
  Megan Horneman: As we mentioned, from a tariff perspective and political perspective, get used to this being part of the headlines, but don't react from a market perspective because of these headlines Because, as we've mentioned, these tariffs are very fluid.
• 4:29
  Megan Horneman: What they're coming forward with sometimes is a negotiating tactic, sometimes it's a scare tactic and they're obviously all the.
• 4:38
  Megan Horneman: Canada and Mexico are working with the US.
• 4:41
  Megan Horneman: They want to find a good solution here.
• 4:42
  Megan Horneman: We don't know how much further this will go.
• 4:46
  Megan Horneman: The biggest risk from an economic standpoint is inflation.
• 4:48
  Megan Horneman: The Fed's going to be watching that.
• 4:50
  Megan Horneman: We have had some upticks in inflation.
• 4:53
  Megan Horneman: We'll watch that closely.
• 4:54
  Megan Horneman: There's been some upticks in the underlying components in inflation, like in manufacturing and services, that are worth monitoring.
• 5:02
  Megan Horneman: There are certain areas of the equity market.
• 5:04
  Megan Horneman: If you have cash on the sidelines, start looking at some of these areas.
• 5:08
  Megan Horneman: Look at small and mid-cap stocks.
• 5:10
  Megan Horneman: Take a look at international.
• 5:12
  Megan Horneman: These might be a little bit more isolated from the domestic situation that's going on here in the US.
• 5:18
  Megan Horneman: That's all we have today with this Impact Edition Again, it's a new thing we're rolling out for the season two and we'll be back, obviously from a political standpoint, with many more of these that are moving so quickly.
• 5:30
  Megan Horneman: As if you'd like a further history of our podcast, you can go to MarketsWithMegan.
• 5:33
  Megan Horneman: FM.