By Peter Wechsler
President & Co-Founder, Franklin Retirement Solutions
[email protected]
On Wednesday, the Fed announced that it was holding interest rates steady again. As you know, the president has been pushing the Fed to lower rates. According to The Wall Street Journal, “The Federal Reserve issued a warning. Fed Chair Jerome Powell said at a news conference that the economy faced growing risks of higher unemployment and higher inflation due to tariff increases. Speaking after officials agreed to hold interest rates steady, Powell said that if large increases in tariffs are sustained, they could represent a shock to the economy.”
To again show his disdain, yesterday morning Trump said in a Truth Social post: “‘Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue. Other than that, I like him very much.” Obviously, the Fed governors and the chairman are afraid to lower rates, which could rev up the economy along with inflation.
Nobody knows what’s going to happen with the tariffs, China, and ultimately our markets, employment, or whether a recession is in the cards.
What I keep reading is how hard it is for many businesses to plan ahead due to all the uncertainty around tariffs, especially those that do business with China. With tariffs at 145%, many businesses are just canceling orders. Numerous analysts keep talking about how many shelves may be empty for back to school and Christmas. We’ll see, as businesses are usually pretty good at finding ways around problems. Nevertheless, uncertainty will definitely affect the economy.
With all that being said, the markets have rebounded. As of Thursday morning, the S&P is only down 4.2% year-to-date, while the Nasdaq is still off 8.1%. Let’s hope the markets continue to rally.
Happy Mother’s Day and enjoy the weekend!
Peter