With the trade war continuing to intensify the future of the stock market is becoming more and more unclear. The S&P 500 dropped 2.7% to drag it close to 9% below its all-time high. Furthermore, The S&P 500 has swung by more than 1% up and down 7 times in 8 days due to Trump constantly creating tariffs before quickly delaying whether or not they go into effect. Trump is of course trying to bring manufacturing jobs from foreign countries, to the U.S. The Treasury Secretary, Scott Bessent, has also said the economy may go through a “detox” period as it weans off an addiction to spending by the government. Overall, this administration is trying to limit federal spending while also cutting the federal workforce and increasing deportations, which could hinder the job market. There is nothing stable about any of these policies and the expression of pessimism has increased as a result.
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The intensification of the trade war and the frequent tariff changes are clearly taking a toll on market stability. The S&P 500’s 2.7% drop, along with frequent swings, signals a lack of confidence in the economic outlook. Investors thrive on predictability, and when policies shift abruptly, as seen with the back-and-forth on tariffs, it creates an environment of risk. President Donald Trump is dismissing the tariffs and saying it is no problem even though they create tensions with trading partners, leading to retaliatory measures and potentially higher consumer prices. Furthermore, reducing immigration or increasing deportations might exacerbate labor shortages, particularly in industries like agriculture, construction, and hospitality, which heavily rely on immigrant labor. In conclusion, the current economic climate appears to be defined by significant uncertainty, primarily driven by inconsistent trade policies, fiscal austerity measures, and controversial immigration policies.
When the stock market reached record highs it was apparently because the market and its investors were hopeful for the new administration. Now that the new administration is here and the stock market is struggling, the excuse is its because of the previous administration or that the stock market doesn't matter. The fact is many economists predicted this initial outcome and while the long run effects are unknown, the American people are being hurt in the short-run.
I think it's very easy for people to rally behind tariffs, because they in theory sound great. Economic theory makes their story a little more realistic and now I think people are starting to feel some of the hurt. I wonder if this will lead to further polarization or bring people together. While the long run promise is still possible it is undeniable that the short run effects will not be easy.
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