The stock market is a force to be reckoned with, and its reaction to recent economic policies is telling. As Michael Cembalest noted in his latest “Eye on the Market” report, the market cannot be intimidated or bullied into submission.
Tariffs have been a major point of contention for investors, with many fearing that the latest measures could lead to stagflation and even a recession. According to Ed Yardeni and David Kelly, experts at JP Morgan, tariffs raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity, and increase global tensions.
The market is pricing in these risks, with stocks reacting sharply to news of tariffs. While some may argue that the market is overreacting, it’s clear that investors are not happy about the impact on margins and earnings.
However, it’s worth noting that the stock market has a history of surprising us. After trillions of dollars were spent during the pandemic, interest rates shot up and inflation reached a four-decade high. The market responded by punishing stocks and bonds, but also created a buying opportunity in 2023.
So, could we be seeing another buying opportunity on the horizon? My general stance is that when short-term sentiment turns bearish, it’s often a sign of long-term bullishness. Buying stocks during corrections can be a winning strategy as long as you can hold on for the ride.
In any case, the stock market is speaking loudly and clearly about economic policy. As investors, it’s essential to listen and adjust our strategies accordingly. Whether through diversification or sticking with a core portfolio, it’s crucial to stay disciplined and focused on the long game.
Source: https://awealthofcommonsense.com/2025/03/the-stock-market-doesnt-care-what-you-say