Everything's on Fire

Breakdown

Let's rip the bandaid: the US economic situation is looking solidly in the toilet. Markets are down, uncertainty is up, and we've got a fresh batch of tariffs causing chaos. But before you liquidate everything and build a bunker, let's put this in perspective. Markets have survived worse, and while this particular economic shit-sandwich wasn't necessary, history suggests we'll eventually recover.

Tariff Turmoil and Market Meltdown

The S&P 500 has already lost about $5 trillion in value since its peak last month, with major indexes taking their biggest hits of the year in recent weeks. The trigger? Primarily Trump's barrage of new tariff policies against major trading partners including Canada, Mexico, and China. ¹

These tariffs aren't just abstract policy wonkery - they're having real-world impacts. Major retailers like Walmart, Target, and Kohl's are already warning about consumer pullbacks, Delta Airlines slashed its profit forecast in half, and small business uncertainty has surged to near-record levels.² Even if you don't own stocks directly, this affects retirement accounts, pension funds, and eventually jobs.

The risk of recession has nearly doubled since January according to some analysts. The CNBC Fed Survey shows the probability rising to 36% from 23%, with the average 2025 GDP forecast plummeting to 1.7% from 2.4%.³ Even more concerning, the Atlanta Federal Reserve Bank's GDPNow forecast for Q1 2025 has dropped to -2.4%.⁴

1. https://www.reuters.com/markets/us/investors-flee-equities-trump-driven-uncertainty-sparks-economic-worry-2025-03-10/

2. https://www.cnn.com/2025/03/12/economy/recession-tariff-trump/index.html

3. https://www.cnbc.com/2025/03/18/slower-economic-growth-is-likely-ahead-with-risk-of-a-recession-rising-according-to-the-cnbc-fed-survey.html

4. https://www.npr.org/2025/03/11/nx-s1-5323098/trump-economy-uncertainty-tariffs-confidence

Historical Perspective: We’ve Been Here Before

Before you panic-sell everything, remember that market downturns are normal (if painful) parts of economic cycles. In fact, in 16 of the 31 recessions that have struck the U.S. since the Civil War, stock market returns have actually been positive.⁵

Even in the worst cases, markets eventually recover. If you had invested $100 back in 1870, it would be worth over $3 million today - despite living through the Great Depression, numerous wars, and countless market crashes.⁶ Similarly, after the shocking 22.6% single-day crash on Black Monday in 1987, the market actually closed out that year with a small gain and recovered all losses within two years.⁷

The lesson isn't that crashes don't matter - they absolutely do, especially if you're near retirement or need your money soon. But for long-term investors, patience in the market has traditionally rewarded most investors despite inevitable bouts of turbulence.⁸

5. https://russellinvestments.com/us/blog/stock-market-us-recessions

6. https://www.morningstar.com/economy/what-weve-learned-150-years-stock-market-crashes 

7. https://www.bankrate.com/investing/biggest-stock-market-crashes-in-us-history/ 

8. https://www.hartfordfunds.com/practice-management/client-conversations/managing-volatility/top-10-stock-market-drops-recoveries.html

Wrap Up

We're facing economic headwinds that were largely avoidable. These tariffs are essentially a self-imposed tax that's hitting markets, businesses, and eventually consumers. The risks of recession are real and rising.

But market history teaches us two things: First, panicking and selling at the bottom is usually the worst move. Second, markets have survived and eventually thrived through far worse conditions.

This isn't a "buy the dip" newsletter - the bottom could be further away than we think. But it is a reminder that economic cycles happen, recoveries eventually follow downturns, and maintaining a diversified, long-term focused approach is still your best defense against market insanity.

For those keeping cash on the sidelines, opportunities will emerge. For those already invested, patience will likely be rewarded - even if that patience is severely tested in the coming months.

Thanks for reading!
Jake