RALEIGH, N.C. — All eyes have been on the stock market as tariff announcements and pauses have created a market rollercoaster. But can these trends be predicted?
What You Need To Know
- The stock market is said to be predictable when it comes to tariffs
- Financial and market analysts suggest a recession is more likely now than it was in January
- Those with a 401K plan are advised to keep tabs on their retirement accounts
- Wall Street had a relatively quiet day Tuesday
In recent weeks, Wall Street and the world watched as markets swung high and low, leaving many wondering what may be next.
Richard Warr, the associate dean for faculty research and professor of finance in the Poole College of Management at N.C. State University, says a large movement in the market is not out of the ordinary.
He also pointed to the ripple impacts on the economy during 2008 when home prices fell dramatically due to the collapse of the housing market and a recesssion hit.
While it may be hard to pinpoint where the market could stand in the next few months, Warr says the stock market’s reaction to tariffs follows a trend.
“The reaction of the stock market is predictable," Warr said.
He said in general, the stock market doesn't like tariffs.
"Tariffs impede the flow of global trade,” Warr said.
With tariffs negatively impacting the ability for companies who source and import products from overseas, the added uncertainty of tariffs pausing and percentages changing adds an additional stress to businesses.
“Businesses like to plan. They like to plan hiring, who they're going to hire, how are they going to expand their manufacturing. When are they going to introduce new products. They like to make these decisions, but these decisions are hard to make when the global trading arena keeps changing. ... That's basically what tariffs are, changing the rules,” Warr said.
He said while he doesn’t have a crystal ball, the stock market will continue to be uncertain as tariff guidelines remain influx.
Looming days on the stock market, such as Black Monday, Black Tuesday and the COVID-19 pandemic crash in March 2020, are causing panic among many investors and consumers, who are fearful there could be another recession.
Warr says while he is reluctant to predict a recession, other financial market analysts have stated there is an increase in the probability of a recession since tariff policies started, but that doesn’t mean one will happen.
“Recessions are caused because people cut back on spending. People consume less, there's less growth in the economy. Tariffs dampen down economic growth,” Warr explained. “They reduce the ability of companies to invest because companies have to spend more money on importing products. They also reduce the sales of company, of products overseas and also, because tariffs can lead to inflationary pressures.”
These higher prices could lead to less people willing to spend money on these goods.
Some investors have started putting their money into other investments like gold. Gold has hit record highs, clocking in at over $3,300 an ounce, but Warr says keeping your investments in the stock market is the better move.
By association, the bond market has also been taking hits recently, which could impact borrowing money.
“We've seen some increase in the interest rates in the bond markets, which is kind of a fairly complex, but that kind of related effect to the overall effects of the stock markets. And this may result in higher borrowing costs, for example, mortgages, car loans and so on going forward,” Warr said.
Additionally, 401K plans have also been a hot topic of conversation. Warr advises that everyone should pay attention to their retirement plan. He says if you are farther away from retirement to stick out the storm, but the closer you are to retirement, your portfolio will be hurt and to look into speaking with a financial adviser.
Retirement plans are just a piece in a bigger economic picture, Warr explained.
"Everything is intertwined,” Warr said.