As voters returned Donald Trump to the White House in November, many had the economy top of mind. Candidate Trump vowed to bring down prices right away and foresaw boom times for the market.
That’s not the case nearly two months into the administration, however.
Instead, markets turned south this week amid a slew of data showing the economy looking increasingly precarious — with federal cuts led by Elon Musk’s DOGE group heightening worries about the state of the job market and tariff threats adding to cost worries for inflation-weary shoppers.
On Thursday, the S&P 500 benchmark plunged into correction territory, meaning it closed 10% below its most recent highs. It was its fourth negative week in a row — the time since such a streak occurred was last summer.
The decline came as Trump ramped up his tariffs strategy, allowing duties on steel and aluminum to come into effect — and incurring retaliatory tariffs — while continuing to threaten higher levies on Canadian goods and bringing new tariff warnings for European champagne and wine imports.
Stock prices largely reflect expectations about future earnings. And CEOs and analysts alike are suggesting U.S. consumers are undergoing a major reorientation of their outlook.
“I do think it’s just a bit of an uncertain world out there right now,” Ed Stack, the chairman of Dick’s Sporting Goods, told CNBC this week when asked about the company’s expectation that its profits will be lower this year. “What’s going to happen from a tariff standpoint? You know, if tariffs are put in place and prices rise the way that they might, what’s going to happen with the consumer?”
On Friday, the University of Michigan reported the year-ahead outlook business conditions fell to its lowest level ever. The survey’s readings for future inflation and unemployment, meanwhile, surged.
Those results are part of a broader trend. The New York Federal Reserve’s Survey of Consumer Expectations, released Monday, showed “notably” worsening outlooks for unemployment, consumers’ ability to make minimum debt payments, and credit access expectations, while the outlook for stocks a year from now fell to its lowest level since December 2023.
The National Federation of Independent Businesses (NFIB), which tends to lean more conservative, reported this week that its uncertainty index climbed to its second-highest recorded reading last month.
“Uncertainty is high and rising on Main Street, and for many reasons,” said NFIB chief economist Bill Dunkelberg in a statement. “Those small business owners expecting better business conditions in the next six months dropped and the percent viewing the current period as a good time to expand fell, but remains well above where it was in the fall. Inflation remains a major problem, ranked second behind the top problem, labor quality.”
A White House spokesperson did not respond to a request for comment on the worsening outlook. But the president is showing no sign of abandoning his tariffs strategy, while members of his administration are now actively preparing the electorate for a potential downturn.
Commerce Secretary Howard Lutnick said this week that a recession would be “worth it” in order to get Trump’s economic policies in place while adding that it would be “Biden’s economy” until the fourth quarter. White House economic adviser Kevin Hassett said trade policy uncertainty would be “resolved” in early April and that the economy would “take off” in the second quarter.
Treasury Secretary Scott Bessent warned the economy needed to “detox” from its supposed reliance on public spending, though he stated in a subsequent interview that he did not envision a recession.
Trump himself has said the economy is in “transition.”
Still others in the conservative information ecosystem are trying to paint the weakening as “accomplishments,” pointing to falling mortgage rates and some daylight on consumer prices.
It is true that gas prices are down, as are egg prices, while mortgage rates are falling. Yet some experts say those developments are occurring against a backdrop of weakening overall demand and fears about economic growth, as consumers begin to process that this is not the economy they signed up for.
“Many consumers cited the high level of uncertainty around policy and other economic factors; frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences,” Joanne Hsu, director of the University of Michigan survey, said in a statement.
Bloomberg News reported that 48% of the survey’s respondents spontaneously mentioned tariffs during interviews with the university, and that the duties were expected to generate substantial upward pressure for inflation in the future.
In a note to clients Friday, JP Morgan chief U.S. economist Michael Feroli lowered his estimate for U.S. growth for the year, while forecasting unemployment would now climb to as much as 4.4%.
“Heightened trade policy uncertainty should weigh on activity growth, particularly for capital spending,” he said. The tariffs Trump has made good on imposing, meanwhile, are set to “create a bump to headline inflation and a corresponding drag on consumer purchasing power,” he said.
“Last week we held off on revising our economic forecast as we awaited greater clarity on trade policy,” Feroli wrote. “In hindsight, we could end up waiting a very long time.”
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