Good morning. Oh my. Yesterday’s market selloff was met with an unpleasant encore early this morning, as China announced a boost in tariffs of their own for goods imported from the U.S. and investors panicked as a result. As of now, there is no tit-for-tat retaliation announced from Washington … though it is still rather early in the session. Meanwhile, a jobs number was released this morning showing hirings had far greater gains than expected for March and the Administration was quick to claim this is due to the “bold trade and economic agenda.” The only issue here is the “retaliatory tariffs” were not announced until April, so it appears to be the future months that have economists worried. Along these lines, JPMorgan increased its assessment on the likelihood of a global recession this year to 60%, putting out an uncomfortable assessment that “there will be blood.” Yikes. Meanwhile, the Fed remains between a rock and a hard place as Jerome Powell announced this morning that the impact of tariffs will probably be “significantly larger than expected” yet and … according to Bloomberg … they may need to respond to “persistent inflation shock.” This is quite the dilemma in which we are now entrenched. On the one hand, we have the Fed acknowledging that tariffs will, in all likelihood, lead to a slower economic growth … which they don’t want … yet higher inflation might be in store (which is where stagflation concerns are raised). At the same time, the president is reportedly publicly saying this is a perfect time to cut rates … an action the Fed might certainly not want to take in the face of rising prices. So much going on. So much to unwind … as stocks continue their descent. I read an interesting article this morning on the supply chain and will bore you by sharing a story on pistons in the following paragraph … as it helped me understand just one of many issues. Powered aluminum, produced in Tennessee, heads to Pennsylvania where it is turned into rods. These then travel to Canada where they are shaped and polished. Moving once again, these are then sent to Mexico, to be assembled into pistons. These then continue their trip to Michigan to be included in an engine that goes into a car. Of course, the entire process could be done here … but why isn’t it? If it was cost and quality efficient it would all be done in the U.S. … but it’s not the case. There are many products handled in this fashion, and shifting to full domestic manufacturing would … in many cases … greatly add to the cost. Okay, that wraps it up for me today as I take another peek at the markets (ouch) and get ready for lunch. I got on the scale this morning and will report that, finally, my winter fat is gone … … but now I appear to have spring rolls. Have a great day, Joseph G. Witthohn, CFA Have any questions? Please contact info@teamemerald.com
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