Economic volatility marks Trump’s second term

President Donald Trump’s second term has been marked by significant economic activity and market volatility. In the first 100 days, the administration enacted over 100 executive orders, but uncertainty looms despite a strong job market and inflation inching towards the Federal Reserve’s target. Recent corporate forecasts and stock market reactions suggest businesses are cautious. General Motors and UPS have adjusted their forecasts due to the uncertain economic landscape. Michael Hans, Chief Investment Officer for Citizens Wealth, noted that while some agenda items could ultimately be positive for growth, uncertainty from potential implications of tariff policy on the labor market and inflation has dampened sentiment. According to the University of Michigan consumer sentiment index, which has seen month-over-month declines, consumer sentiment has decreased. Matt Colyar from Moody’s Analytics mentioned that consumer sentiment could drop further as the impacts of tariffs become clearer. Business optimism, which peaked post-election, has since cooled as evidenced by the National Federation of Independent Business’s small business optimism index. Bill Dunkelberg, NFIB’s Chief Economist, stated that business owners have scaled back expectations on sales growth as they determine how policies will affect them. Dana Peterson, Chief Economist at The Conference Board, remarked that tariffs unevenly impact industries, leading some businesses to delay investments and hiring decisions.

Economic uncertainty defines Trump’s term

Trump’s tariffs, announced on “Liberation Day” (April 2), have led to significant market reactions. According to the Budget Lab at Yale, the effective tariff rate could climb to levels not seen in over a century, potentially hitting 28%. This rate may affect the prices of leather products, apparel, and electrical equipment more than others. The stock market has been volatile, with the S&P 500 experiencing dips and recoveries influenced by tariff announcements. The Federal Reserve’s statements have also swayed market movements. Fed Chair Jerome Powell acknowledged that the economic effects of tariffs could include higher inflation and slower growth. The 10-year US Treasury yield experienced significant fluctuations, soaring as much as 50 basis points to 4.49% following tariff announcements, which dropped bond prices. This particularly impacted retirees who were heavily invested in fixed-income securities. While Trump’s policies could potentially lay the groundwork for long-term growth through tax and regulatory changes, immediate effects have led mainly to market uncertainty and mixed sentiment among businesses and consumers. The coming months will be crucial in determining the full impact of these economic changes on the broader economy. Image Credits: Photo by Evangeline Shaw on Unsplash