The idea that the Federal Reserve will rush to rescue investors in a crisis has comforted investors for decades. But in the large decline in the market caused by President Trump’s invoices, there is no rescue of the Fed.
Jerome H. Powell, the president of the Federal Reserve, made it clear on Friday. Invoices are much “bigger than expected”, and their huge scale makes them particularly important for the Central Bank to understand their financial impacts before it took action.
“It is too early to say what will be the right course for monetary policy,” he told a conference in Virginia.
In fact, I would say, the possibility of further reducing the market is much greater than the possibility that the Fed will turn markets around the near future.
What US stock investors have experienced so far is what is known on Wall Street as a correction – 10 % or more than the top of the market. The correction does not end, with this common definition, until the markets have turned and this top has been overcome. For days, however, the momentum of the market was almost completely down. Thus, another dubious distinction is in the look: a market market, which is a reduction of at least 20 % from the top of the market. For the S&P 500, which closed on 5,074.08 on Friday, from the top of 6,144.15 on February 19, a bears market is already at a voice distance, a minimum of 2.6 percentage points away.
It would be great to be able to say that the depth of the stock market is near or already achieved, said Edward Yardeni, a veteran market observer in a discussion on Friday.
“I was good enough to pick up the bottom of the market and I’m not shy to call one when I see one,” he said. “But this has usually happened when the Fed has taken action. And right now, it is quite clear that Powell won’t do that.”
The Fed holds this time for good reasons. The impact of the sudden new series of invoices imposed by the president-and the invoices announced Friday from China, which are likely to be followed by similar moves from many other countries-is not clear at all.
But that is very certain. Invoices are a tax that is likely to slow economic growth and raise prices. These results complicate the task of the Fed, which has a double mandate: promotion of full -time (and economic growth) and keeping the inflation rate on a reasonable level.
With the Fed, still struggling for inflation after raising prices of 2022 and 2023, it is reluctant to lower interest rates when price increases in a number of goods could be just around the corner. And on Friday, the latest job report by the government showed that the economy in March remained quite strong. Employers added 228,000 jobs for the month, much more than expected, and while the unemployment rate increased slightly, to 4.2 % from 4.1 %, there were few signs of significant weakness.
Since the framework, Mr Powell appeared to signal that it would need a real slowdown, with a significant reduction in work, to justify interest rates under current conditions. Consumer confidence has also been reduced and an index of economic policy uncertainty that is closely monitored by economists and business executives have increased. But these data is not yet here. If they are not wrapped, invoices are likely to take some time to lead to extensive redundancies – and without strong slows, the Fed may be reluctant to act.
However, the Fed has already been put under pressure by President Trump at lower interest rates. This is the “perfect time” for a cut of the Fed price, he said on Friday’s social media platform, shortly before Mr. Powell’s speech. Maintaining Fed’s independence is important in the markets and there was no indication that this apparent presidential pressure had any effect on Mr Powell’s steady determination to rule out his time and reduce interest rates only when and if the Fed decided it was time to do so.
Thus, investors may need to be very patient and hope that changes in duty policy will occur quickly in Washington to convert markets around and, more importantly, to prevent a recession. The recession is usually associated with widespread job losses and cause enormous difficulties in the real world as well as in financial markets.
The recession usually make bear markets much worse, Ned Davis Research, an independent financial research company, has found. Bear purchases accompanied by recession had an average duration of 528 calendar days and a 32.8 %reduction in the market, the company found, using Dow Jones Industrial Medical data since 1900.
“Bear markets are unfortunate every time they happen, but they tend to be much worse if there is a recession,” Ed Clissold, US general Davis Davis, said in an interview.
However, Trump’s invoices, which would be the steepest in a century, if fully carried out, have already begun a world trade war. The president could be reversed, remove most of the invoices and try to overthrow some of the losses, but there is no evidence that he is planning to do so. In the meantime, the chances of recession and further market reductions are increasing.
Mr Yardeni said that while he remained optimistic about the long -term prospects for the United States, fear, confusion and uncertainty about President Trump’s duties make him less positive for the following year. The chances of “Statfleflation” – a terrible combination of high inflation and a slowdown in the economy – are now 45 % in the next 12 months, from 35 % a month ago, he said, and this would not help the stock market.
Goldman Sachs says there is now a 35 % chance of recession next year, and late in March destroyed its appreciation for the S&P 500, raising prices by 5 % over the next three months. At the beginning of the year, Goldman was unstable, with an increase of 16 % on the S&P 500 during 2025. If the market falls much, Goldman and other market strategies are likely to review their estimates even lower. JPMorgan has already increased the chances of a global recession this year to 60 %.
As I have pointed out in the recent columns, but bonds have yielded well this year, relaxing some of the pains for investors and international stock markets have done better than US, although global brands-have diminished as the reality of a new world.
But in a complete recession and a market of bears, few people will be completely saved. In the end, markets are recovering, and those with large horizons are likely to prosper, no matter what happens in the coming weeks.
Some market reductions are blessed short. But in the market of bears launched in October 2007, during the great recession of this period, it took more than four years, including dividends, for investors in the S&P 500 to climb their entries to this index.
Even so, it’s worth hanging, for those who managed to do so.
From the top of the 2007 market, the S&P 500 had a total of over 356 %, including the latest market reduction. Market stay has been back in the long run and is likely to do so again. But adhesive with it, even in times like these, can be tough. You need power and abundance of patience to be a long -term investor.
