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This Week’s Market Recap… 📊

Heading into 2025, there was a wave of optimism fueled by expectations of tax cuts and deregulation under the newly elected Trump administration. But that sentiment quickly wavered. Just one week in, President Trump made unexpected comments about tariffs, raising early concerns.

At first, markets brushed it off. The S&P 500 even reached an all-time high, as many investors assumed the tariff rhetoric was simply a negotiation tactic rather than a serious policy shift. However, as the tariff talk continued, uncertainty began to take hold. Then, on February 20th, a sharply negative consumer sentiment report shifted the tone entirely—suggesting that consumers feared inflation could make a comeback. That report marked the start of a 10% market correction.

Consumer sentiment is known as a “leading indicator,” offering a glimpse into potential future economic trends. It’s considered “soft data” because it’s survey-based, rather than grounded in concrete figures like employment or CPI. Normally, consumer confidence offers valuable insight—but in today’s deeply polarized political climate, its reliability is more questionable.

The most alarming data point in the report was inflation expectations, which came in at around 4%. Markets reacted swiftly—stocks dropped. Interestingly, political affiliation significantly influenced the responses: Republicans expected 0% inflation, while Democrats expected 7%. Because Democrats made up the majority of respondents, the headline number was skewed higher.

It’s a bit ironic that such a politically tinged report helped trigger the correction. While the economy has softened slightly, hard data hasn’t signaled a major downturn. Tariff-related uncertainty may cause some slowing, but I don’t see enough evidence for the kind of inflation surge or sustained weakness the soft data suggests. For now, we remain in a “wait and see” environment.

My Schedule This Week!

Have a Blessed Weekend!

Disclaimer: Wolf Financial does NOT offer financial advice. All content provided is strictly for informational purposes. Wolf Financial is not registered as an investment, legal, or tax advisor, nor as a broker/dealer. Please be aware that trading any stock or crypto-related asset carries inherent risks and may lead to substantial capital losses.