Market volatility due to tariffs and recession fears, investors advised to remain cautious and seek opportunities to acquire quality companies at discounted prices
From Morningstar: 2025-04-07 10:40:00
Investors are urged to resist the urge to sell stock at discounted prices during market turmoil. Morningstar experts advise against hasty decisions and emphasize the importance of research and careful consideration in uncertain market conditions.
Tariffs have caused a sharp decline in the Morningstar US Market Index, with the probability of a recession in 2025 rising to 40%-50%. Investors are advised to consider the investment implications of tariffs and seek protection through US Treasury bonds amid economic uncertainty.
Expectations of lower growth have increased the likelihood of interest rate cuts by the US Fed. Treasuries offer a safe haven for investors as yields on 10-year bonds fall below 4%, serving as an attractively priced ‘insurance policy’ in the face of economic challenges.
Tech stocks, particularly US technology companies, have suffered significant losses due to tariffs. Diversification is crucial as consumer defensives and developed markets outside the US and emerging markets fare better. Major trading partners experienced mixed impacts, with Mexican stocks rising while European companies fell sharply.
Despite market volatility, a 60/40 portfolio like Morningstar’s Moderate Target Allocation Index remains relatively stable. Investors are advised to remain cautious but look for opportunities to acquire quality companies at discounted prices amidst market turbulence.
Inflation concerns rise as the latest CPI measure is released, with the core measure expected to moderate. Federal Reserve speeches and Q1 earnings season will provide insights into interest rate expectations and business conditions. Large discounts between price and fair value present opportunities for investors in uncertain times. 1. The stock market saw a 2% increase today following positive earnings reports from major tech companies. The S&P 500 closed at a record high of 4,400 points, with Apple and Amazon leading the gains.
2. Unemployment rates dropped to 5.4% in July, the lowest since the start of the pandemic. The economy added 943,000 jobs, exceeding expectations and signaling a strong recovery.
3. The FDA approved the first Alzheimer’s drug in nearly 20 years, despite controversy over its effectiveness. Aduhelm, developed by Biogen, is expected to generate billions in revenue.
4. The Tokyo Olympics are in full swing, with Team USA leading the medal count. Swimmer Katie Ledecky and gymnast Simone Biles have already won gold medals, boosting American spirits.
5. Climate change continues to impact the West Coast, with wildfires spreading in California and Oregon. Thousands have been evacuated, and officials are warning of extreme fire danger in the coming days.
Read more at Morningstar: Markets Brief: Bruised by Tariffs, Investors Brace…