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The market (^GSPC, ^IXIC, ^DJI) is facing uncertainty in the wake of President Trump's tariff announcement, as investors worry about the potential for slower growth and rising prices.
Invesco global market strategist Brian Levitt joins Catalysts host Madison Mills to explain that the 10-year Treasury (^TNX) and small caps are signaling a significant slowdown in US growth.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Brian, plenty to talk about this morning. Investors are are freaking out. My DMs are flooded this morning with people who are stressed. How concerned should people be in this moment?
I think we should still be concerned because there were two things we were hoping on liberation day that we would get some clarity around where this is ultimately heading and that rate and that the tariff rates may come in lower than had previously been expected. So neither of those things happened. Look, I never went to medical school, I didn't take the hypocratic oath, but I do believe the first rule of policy making is do no harm. And so we had a good setup for markets this year. I think most outlooks were generally favorable, a resilient economy and stable inflation. And so markets were priced for that and and we're moving in the other direction right now. I mean, this is clearly going to slow growth. The bond market is telling us that, but the additional challenge is prices will rise, so can the Federal Reserve respond to it? Markets are down a bit, but perhaps not down enough to reflect the new growth and inflation dynamic that we're heading into.
Yeah, I'm curious about why we're not seeing even more selling this morning. Do you do you feel like the market is pricing in how risky this is about to be accurately?
Well, I think the market is still hopeful that this isn't the end. Right now, we've got some pretty big moves. Like let's not forget. We we had already, um, you know, come off the highs pretty significant. We've got some pretty big moves in markets, but yes, it's a market that still is waiting to see or these the negotiating points or is can think can tariff rates actually go higher from here? Could we have a tit for tat reciprocal trade war? Um, I mean, that would be the that would be the bigger challenge right now. I think the markets, um, selling off, but not necessarily the full extent because waiting to see where we go from here.
At least not unless you were looking at small caps, which have officially entered into a bear market this morning.
And that's your I mean, that's your growth proxy, right? If you're going to look, um, what is this inflationary? Is this a growth challenge? How is the market viewing it? I mean, small caps are your growth proxy. The 10-year Treasury is your growth proxy. So it is a market telling you that growth in the United States is set to deteriorate pretty significantly.