Tariff Folly: A Stock Market Tragedy?

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The U.S. stock market, that fickle lover, trembled earlier this year as the specter of tariffs loomed large, threatening to choke growth and inflate prices-a pantomime of recessionary dread. The S&P 500 (^GSPC), that paragon of equity, fell more than 10% in two days, only to recover when the administration, ever the procrastinator, delayed its most onerous duties. A comedy of errors, one might say.

Since then, the president, that steadfast actor in this grand farce, has clung to his tariffs with the fervor of a man who believes the world revolves around his own delusions. When the Bureau of Labor Statistics, that ungrateful servant, presented a weak jobs report in August, he dismissed it as “rigged,” a term as flimsy as a stage curtain. The next report, alas, was worse-27,000 jobs added monthly, a figure so dismal it would make even the most jaded playwright weep.

Yet the president, that consummate showman, declares inflation “solved,” a claim as credible as a magician’s promise of eternal youth. The data, however, tells a different tale: inflation has reaccelerated since his “Liberation Day” tariffs, a performance so lackluster it leaves the audience bewildered.

Here lies the crux of the matter.

Economists, those sober sages, foresee inflation’s encore as tariffs climb the stage

The U.S. measures inflation with two metrics, each a different act in this economic play. The Consumer Price Index (CPI) tracks direct spending, while the Personal Consumption Expenditure (PCE) index, that more discerning critic, encompasses indirect costs. For instance, health insurance premiums, though vital, are excluded from the CPI but embraced by the PCE-a quirk as perplexing as a poet’s rhyme scheme.

The Federal Reserve, that cautious director, favors the PCE, which rose 2.7% in August-a crescendo since April’s 2.2%. Economists, those ever-vigilant stagehands, predict it will climb to 2.9% by year’s end. Thus, the Fed faces a dilemma: a faltering jobs market and rising prices, a stagflation so absurd it defies the laws of both economics and comedy.

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The economy, that weary actor, may falter sooner than audiences expect

The Federal Reserve, that prudent manager, typically raises rates to curb inflation and cuts them to spur growth. Yet here, the president’s tariffs have conjured a paradox: inflation and weakness coexist, a situation so absurd it would baffle even Molière’s most obtuse characters.

In September, the Fed cut rates by a quarter point, a gesture as symbolic as a clown’s hat. Historically, the S&P 500 has risen 13% after such cuts, but this rule falters when recessions lurk. A machine learning algorithm from Moody‘s Analytics, that modern-day oracle, now forecasts a 48% chance of recession-a figure so close to the 50% threshold it makes one clutch their pearls.

Mark Zandi, that astute observer, warns the economy teeters on the brink, with consumer spending stagnant, construction and manufacturing retreating, and employment poised to plummet. “The Fed, that beleaguered conductor, finds itself in a symphony of chaos,” he writes, a sentiment as poignant as a tragic opera.

In sum, the president’s tariffs have sown discord in the jobs market while inflating prices-a farce that economists expect to continue. The Fed, that hesitant director, may yet cut rates, but only if inflation eases. For now, investors should tread carefully, for the stock market, that mercurial muse, offers no guarantees.

Thus, the curtain falls on a tale of fiscal folly, a reminder that even the grandest of plays can end in ruin. 🚨

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2025-09-28 11:25