📉🔥 Volatility

Good Afternoon. Another bad week for markets, thanks to the constant flow of tariff news, creating anxiety and volatility. Markets saw a couple of days with 1000+point moves, so investors are trying to figure out the direction. Macro data was mixed. With this week’s drop, markets gave up the post-election gains.

The economy overall is still doing fine, and the true impact of tariffs is still unclear.
Below are the critical points that I think are favorable for the stocks and show that the long-term outlook is still positive:

• What can happen?

  Inflation: In last week’s newsletter, I provided the details of Goldman Sachs's inflation forecast if all the proposed tariffs are imposed. In reality, it's unlikely that all the tariffs will be imposed, and that also for a longer timeframe. Still, if we assume they are all implanted, GS predicts inflation will increase by 0.5% by the end of this year. I am not a fan of GS research, but this is not an assumptions-based analysis; it is purely based on the actual trade data, so I trust it. I think a 0.5% maximum impact on inflation is very low, and due to higher inflation from the last few years, inflation is expected to keep going down closer to the Fed target. Tariffs should not alter this based on this GS analysis.

  Economy: If tariff volatility remains, the economy is expected to slow down later in the year. However, most institutional GDP forecasts show a slowdown but no recession. Check the Morningstar economic outlook in the curated insights section.

  Unemployment: Corporations may slow down their hiring if the tariff uncertainty persists. In addition, DOGE-related layoffs can impact the unemployment rate negatively, which is holding robust as of now.
  
  So it’s not difficult to figure out what the Fed will do.

  Sticky Inflation but under 3% + economic slowdown + weak labor markets = More Rate Cuts
  
  One more thing to remember is that the Fed has average inflation targeting (unless the Fed changes its framework post ongoing framework review), which gives the Fed flexibility to cut rates even if inflation remains slightly elevated. To summarise, the current tariff-induced uncertainty, in most cases, will lead to more rate cuts, which is generally positive for the stocks.

  
  If you are a growth investor, your portfolio must have significantly decreased in the last few days. In these times, conviction matters in the stocks you own, which comes from the fundamental analysis/understanding of the business. Check my previous newsletter, where I covered the Peter Lynch philosophy. Periods of uncertainty give long-term investors buying opportunities.
  

• Artificial Intelligence:

  • Another great company in the AI space (after Nvidia), Broadcom, reported good results this week. Broadcom highlighted the growth it’s experiencing on the earnings call with continuous spending from hyperscalers and new avenues for growth. More details are in the curated insights section.

  • Morgan Stanley's research forecasted that the AI revenue could surpass $1 Trillion by 2028, up from $45 billion in 2024. Read
    

• Crypto:

  Positive news keeps coming in for Crypto, which clearly shows the influence of this administration on regulators.

  • Recently, the SEC dropped crypto-related cases against Coinbase and Robinhood.

  • This week, OCC clarified that banks can engage in certain crypto activities without prior approval.

  • Trump also issued an executive order to establish a strategic Bitcoin reserve.

For the week:

• The S&P 500 is down 3.1%, the Nasdaq is down 3.45%, and the Dow 30 is down 2.37%.

  

  Source: Barchart

CNN's Fear & Greed Index now stands at 20 (Extreme Fear) out of 100, which is no change from last week. Details here

The top five trending stocks on Reddit are SPY, Nvidia, Tesla, Reddit, and Intuitive Machines. Read More

Here is a summary of this week’s key economic releases:

Target Rate Probabilities for Mar 19th FOMC Meeting:

CME FedWatch

Fed Speak: Chairman Jerome Powell stated Friday that the central bank can afford to wait and assess the impact of President Trump’s aggressive policies before adjusting interest rates. Amid market concerns over tariffs and other uncertainties, Powell reaffirmed the Fed’s recent stance of patience in monetary policy. Read

Google vs. DoJ: In a Friday filing, the Justice Department reaffirmed its November proposal that Google divest its Chrome browser after an August ruling found the company guilty of operating an illegal monopoly. Read

24/5 Stock Trading: Nasdaq aims to launch 24/5 trading in late 2026 and is in talks with regulators, President Tal Cohen shared on LinkedIn. Extending trading hours would help exchanges capture global demand currently served by alternative platforms by drawing investors across time zones, boosting volumes, and enhancing liquidity. Read

Crypto Reserves: President Trump issued an executive order establishing a strategic bitcoin reserve. White House Crypto and AI Czar David Sacks stated it would be funded solely through seized bitcoin, avoiding taxpayer costs. The order also creates a U.S. Digital Asset Stockpile under the Treasury Department to manage confiscated cryptocurrencies. Read

OCC On Crypto: The U.S. banking regulator clarified that banks can engage in certain crypto activities without prior approval. The Office of the Comptroller of the Currency stated that national banks may offer crypto custody, participate in stablecoin activities, and join distributed ledger networks. Read

Auto Delinquencies Rise: According to Fitch Ratings, Americans are falling behind on car payments at the highest rate in decades. As of January 2025, 6.6% of subprime auto borrowers were at least 60 days delinquent. Read

Costco Mixed: Costco's fiscal Q2 earnings fell short, but revenue exceeded expectations. Net sales reached $62.53 billion, with comparable sales up 6.8% yearly. Read

Broadcom Beat: Broadcom's first-quarter earnings exceeded analysts' expectations, with the chipmaker providing strong guidance for the current quarter. Revenue grew 25% YoY. Read

CrowdStrike Beat: CrowdStrike provided weak earnings guidance, citing continued pressure from the global IT outage that disrupted businesses in July. Read