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Friday’s 2% selloff capped a volatile week, with inflation worries compounding tariff stress. Consumer durables, retail, and communications outperformed, while health tech and utilities lagged. Gold marked its fourth straight weekly gain as risk sentiment deteriorated, while oil held firm and crypto remained quiet.
Are the fundamentals still supportive for equities?
Yes, but the trade narrative is distorting visibility. Corporate earnings growth remains strong, with S&P 500 estimates still calling for over 10% gains this year. Labor markets are firm, the Fed is holding steady, and high-yield credit spreads are still narrow—none of which point to an imminent downturn.
Still, tariffs could slow growth and drive goods inflation higher. The U.S. may be less trade-reliant than other economies, but any stagflation risk would pressure margins and consumer sentiment. With the Economic Policy Uncertainty Index near pandemic highs, traders are hesitant to chase rebounds too aggressively.
What’s the best way to approach this market?
With a binary event on the calendar and a wide range of possible outcomes, this is a market favoring balanced exposure. Health care and financials offer relative safety with attractive valuations, while a measured tilt toward value can provide insulation if trade stress escalates.
While a V-shaped rally seems unlikely, the current pullback may open selective opportunities—especially if the April 2 announcement signals a softer, more targeted tariff regime.
For now, staying diversified, overweight equities modestly, and watching sector leadership closely is the playbook. Traders should be ready to adjust positioning once policy clarity arrives.
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