Insights on Tariffs and Market Movement
Last week was a heavy one for markets. As we noted earlier, there was significant potential for volatility driven by macroeconomic data, and that’s exactly what unfolded. Between a lower-than-expected GDP print, a soft jobs report, and heightened geopolitical tension around trade, the result was increased market uncertainty. The most notable downside risk stemmed from the Federal Reserve and the reluctance to commit to a September rate cut, despite mounting evidence of economic slowing and added pressure to the markets. The justification? Powell pointed to tariffs as inflationary, hence resisting a dovish stance. However, Friday’s surprisingly weak payroll report underscored the fragility of the current labor market. Only 73,000 jobs were added in the last month, well below trend, and downward revisions to May and June data added to the concern. The data package suggested the Fed may have already fallen behind, and we now expect a rate cut in September, in line with actions taken by other central banks this year. Additional cuts may follow into 2026.
Looking internationally, we continue to track progress on trade agreements. Our research shows that countries securing tariff deals, highlighted in blue on our charts, are seeing stronger market outcomes than those still negotiating or holding out, highlighted in red. While last week’s events were challenging, it’s important to keep perspective. August is historically volatile with typically lower returns. However, fundamentals like credit conditions remain supportive. For example, initial jobless claims held steady at 218,000, indicating there’s no widespread employment breakdown. Moreover, recent U.S. tax reform and continued deregulation could support business activity moving forward.
Fed Signals and Consumer Spending
Building on those insights, the Federal Reserve’s position is worth a closer look. For the first time since 1993, two members of the Fed openly dissented from the policy decision, noting that rates should have been cut immediately. This level of disagreement is rare, especially given the Fed’s typically unified voice. The dissent highlights increasing tension and possible indecision within the Fed itself, as well as growing external pressure from figures like President Trump, who has been vocal about his dissatisfaction with Jerome Powell. Additionally, a Fed member recently resigned before the end of her term, adding another layer of uncertainty.
Turning to GDP, the headline 3% real growth for Q2 was strong. However, beneath the surface, the numbers tell a more nuanced story. Consumer spending, which accounts for about 70% of GDP, remained solid, which is a positive signal for economic momentum. In Q1, businesses rushed to import goods before new tariffs kicked in. This front-loading inflated trade activity early in the year. By Q2, the effects faded, and net exports emerged as a stronger contributor to growth simply because the importing slowed down, not because of increased trade efficiency. In short, the volatility in trade numbers over the past two quarters has masked the underlying trends. We expect Q3 GDP to offer a clearer baseline of what’s truly happening in the economy post-tariffs. All eyes will be on the Fed’s Jackson Hole meeting and the upcoming September decision. These will be pivotal moments as policymakers evaluate whether to shift course amid mixed signals across jobs, growth, and inflation data.
President and CEO
Wealth Consultant
Bobby Norman, CFP®, AIF®, CEPA®
Managing Director
Wealth Consultant
Chief Investment Officer
Wealth Consultant
Vice President
Wealth Consultant
Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.
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