Tariffs, consumer confidence, inflation and the value of diversification.
It was sad to learn of beloved actor Gene Hackman’s tragic death, which brought back memories of so many of his great movies. My personal favorite was “Hoosiers” and Hackman’s locker room address to his small-town Indiana high school basketball team at the state championship.
“Forget about the crowds, the size of the school, their fancy uniforms, and remember what got you here. Focus on the fundamentals that we’ve gone over time and time again. And most important, don’t get caught up thinking about winning or losing this game. If you put your effort and concentration into playing to your potential, to be the best that you can be, I don’t care what the scoreboard says at the end of the game, in my book we’re gonna be winners!”
Cue the iconic slow clap.
It’s good investment advice too, to focus on the fundamentals and not get caught up thinking about winning or losing one game but doing your best over time. We need that advice right now, because we are decidedly in a situation where winning on any given day may be a long shot, though panicking and giving up on our long-term plans will ensure a loss.
Markets are getting rocked by worries over the implications of tariffs as President Trump clarified that levies on Canadian and Mexican imports would move forward on March 4 and that he would also add an additional 10% tariff on China. Trump framed his decision as a response to “unacceptable levels” of drugs coming into the U.S. from Canada and Mexico and supplied by China. Consumers are increasingly seeing that the coming tariffs could lead to higher prices, with both the University of Michigan and Conference Board consumer confidence surveys showing a seriously souring outlook.
Today, the president hosted Ukrainian President Volodymyr Zelensky at the White House regarding a mineral rights deal designed to recover some of the money the U.S. has spent on Ukraine’s defense over the last three years since Russia invaded. In the end, no deal was struck, raising questions about the future of the relationship between the U.S. and Ukraine.
Tensions are high on the world stage as Trump has hosted a steady stream of world leaders, most recently French President Emmanuel Macron and U.K. Prime Minister Keir Starmer. All of this is happening as Trump pushes for an end to the war in Ukraine, while simultaneously also suggesting a U.S. takeover of the Gaza strip to end the conflict in the Middle East.
As earnings seasons winds down, Wall Street watchers now have nothing but time to consider the risks of these moves and wring their hands over the state of our global relationships. It also hurts when market darlings like Nvidia deliver results with an asterisk. On face value, Nvidia’s fourth-quarter earnings per share of $0.89 beat the average analyst estimate of $0.84, and revenue of $39.33 billion topped the average estimate by $1.3 billion. Wow! However, their outlook for margins was tight, cooling some investor enthusiasm, as their prized Blackwell chip’s manufacturing costs appear to be pressing this metric.
Then there were reports that Microsoft had canceled some leases for U.S. data center capacity, raising questions about whether it has secured too much capacity or if Microsoft might be less optimistic about AI demand than thought. The client relationship management software giant Salesforce lowered its earnings forecast, while mobile tech company AppLovin was accused of fraud (claims which they have denied).
Markets are evolving in 2025, with international markets outpacing the U.S. Bond yields are falling instead of rising, and financials, energy and consumer staples are outpacing technology stocks. Big Tech looks tired, leaving Apple the only company that still boasts a value higher than $3 trillion. The jump in jobless claims reported yesterday and sticky inflation reported today with the personal consumption expenditures (PCE) index at 2.5% don’t help confidence in the economy.
Investors are asking, “Is the market peaking?” They wonder, “Is American exceptionalism [the idea that U.S. stocks will do well regardless of what happens elsewhere] over?”
Time will tell, but we believe there has never been a better time to be diversified, both to play defense in the face of uncertainty, and given the valuation gap between the previous star performers of U.S. tech and communications services companies and everything else. We look forward to reviewing your portfolios to demonstrate the benefits of diversification and are considering other tweaks that may be necessary to brace for the future.
If you would like to speak personally with a member of your advisory team, please call 833.RWA.PLAN (833.792.7526).