Closing Thoughts for the Week

There are almost too many moving parts right now to get a handle on everything going on, but let’s give it a try. Perhaps trade war escalation is hitting its peak and sentiment has room to improve here. In previous months, a significant drop in CPI and PPI numbers would have been more than enough to trigger a rally in equities. Not this time.

All of the traditional warning signals are starting to flash now. High yield spreads are beginning to blow up and traditional risk-on/risk-off has fully returned. I keep hearing the phrase “short-term pain, long-term gain” being used, but I don’t think that’s necessarily the case. If you’re looking for a bull case in all of this, it could be a massive tax cut plan down the road.

Tariffs prove to be a continued source of volatility for the markets. With just days until Trump’s “liberation day” on April 2nd, the market appears willing to keep selling off any notion of new tariffs or escalation in the existing trade war. Overall, I believe we’re still looking at risk-off conditions. The shorter-term has become more difficult to get a handle on because the White House’s mood on trade seems to shift every day or two.