Yahoo Finance

US stock futures edging higher this morning after the major averages closed higher on Monday on hopes of President Trump taking a softer approach to tariffs. This comes as economic forecasters on Wall Street predict tariff policies will weigh on business activity this year. Yahoo Finance's Josh Schafer is here with us now. Josh, is this recent bounce off of the lows of the markets due to the data not showing signs of a looming recession?

I think you could certainly argue that way, Brad, right? So what we sort of explored in my story that's on the website this morning, essentially was, yes, economic data is slowing and we've gone through this sort of rerating of economic growth expectations from outperformance to perhaps maybe slightly below 2% GDP this year. But key within a lot of the calls we've been talking about among these economists is, no one's really calling for a recession right now, right? And I think when you talk to strategists and sort of pin those two points together, you're, that's maybe why you've seen a bottom in this drawdown that we saw, right? If you were seeing a pure risk off recession trade, you might have seen stocks fall even further, right? A lot of strategists have sort of highlighted that 50-500 level on the S&P 500, essentially arguing if data were to worsen from here, then maybe we go below 50-500, and then maybe this isn't a buyable dip. But you're seeing a lot of strategists argue this probably is a buyable dip or perhaps a tradable bounce off the bottom. And so I sort of started exploring this yesterday after we got S&P PMIs. Those came in, the composite came in better than expected, one of several data points that sort of lagged in January, then popped up a little bit in February. We're going to keep tracking that sort of data. And of course you guys mention we had Conference Board consumer confidence coming out at 10:00 a.m. today, and there's definitely a difference right now between the vibes that consumers are talking about with the economy and what we're actually seeing within the data. Of course not necessarily a new trend post pandemic, we all remember using the word vibesession a lot, but it does feel like we're back in that sort of dynamic a little bit right now.

And we were talking too, just about the confusion about whether or not the data is currently best suited to give us a sense of those vibes. One question I have for you though, that I know you spoke with sources about, is this idea of whether we are already slow or if we're in the process of slowing. What are your sources looking at there?

Yeah, I mean, I definitely think most people would argue we're in the process of slowing to some extent. The question is, how much do we slow, right? I think the important part to point out was one of the economists I spoke with from Deutsche Bank, Brian had sort of said, you know, I thought consumer spending was going to slow to start the year anyway. That's agnostic of President Trump, that's agnostic of tariffs and agnostic of a lot of those other aspects, right? Consumer spending was pretty hot to end last year to have some giveback there and come back to trend isn't necessarily surprising. Ryan was looking at something like continuing claims, those come out every Thursday, right? So the amount of people that are continuously applying for unemployment benefits on a week over week basis, he said he would expect that number to tick up higher than it is right now if we were seeing a slowdown in the labor market. That number has sort of just been hovering at a three-year high for several months now. So him sort of making the argument that until that number continues to move higher, or you see initial claims move higher and you get layoffs, then maybe the labor market's in an okay place right now. I think the question with both what's just happened to the stock market and the economy is if we're sort of on this thin ice of okay right now, what happens if we do get widespread tariffs and how does that sort of impact the economy? And I think that brings you back to that tariff conversation and why we keep talking about it. I know you guys are going to talk about this in a minute, but if you were to get widespread tariffs, perhaps more than we're pricing in right now, maybe that does weigh on the growth outlook more, and again, you're at an economy right now with a pretty low hiring rate. There's the labor market is steady but not necessarily in a firm, firm spot that it was in two years ago. So when you're on a little bit of thinner ice and you start adding in some variables, that's when people start to get a little worried.

And the other major consideration too, even within that labor market is, where do wages moderate from here, and how does that play out more so in the mindset of the consumer?

Right? And because consumers need to spend, right? At the end of the day, that's sort of what we're talking about when it comes to the economy and why it matters to the stock market. Is we talk about these businesses, these business, these businesses make profits because we all go and spend money, right? Whether it be businesses spending money to other businesses or us going out and buying something from Walmart, they need us to be spending money to in order for them to continue to grow profits. And that's sort of the ultimate looming question here, as always, is, will the consumer keep spending?

Great golf shorts for $16 at Walmart. Really? There you go. All right, we're leaving with a pro tip today. I got to go check those out. That's all I got for folks at home. Life hacks, spending hack from Brad Smith. There you go.

Really?

Yeah.

Yeah.