Tariffs, Turmoil, and the Ticking Time Bomb of the S&P 500

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The S&P 500 (^GSPC +0.01%) has advanced 15% since President Donald Trump’s ascension to office, a feat akin to a drunkard’s stumble up a flight of stairs. One might credit this to the alchemy of artificial intelligence (AI) spending, which has, for now, papered over the fissures in economic logic. Yet the tariffs-those quixotic assurances of “American jobs roaring back”-are proving less a salve and more a fiscal albatross.

  • The unemployment rate, once a sprightly 4% in January 2025, has since swelled to 4.6%, a figure that would make even the most stoic Victorian industrialist shudder. It is the highest since September 2021, a time when the world was still learning to pronounce “Delta variant.”
  • Job creation, that sacred talisman of economic health, has dwindled to an average of 55,000 per month through November 2025. This is the lowest since 2009, save for the pandemic’s absurd zero-sum game. One might say the economy is playing a game of musical chairs, and the chairs have vanished.
  • Consumer sentiment, that barometer of public optimism, has plummeted to its lowest annual average in history. For context, the University of Michigan began measuring it in 1952, a year when television was still a novelty and existential dread had not yet colonized the collective psyche.

Investors, ever the optimists, received further news of tariffs last week. The timing, however, is as poor as a man in a trench coat asking for directions to a brothel at midnight. The S&P 500, in its infinite wisdom, has flashed a warning not seen since the dot-com crash-a signal that, if heeded, might yet preserve one’s portfolio from the more enthusiastic flames of speculation.

The Latest Tariff Revelations

Last year, President Trump imposed tariffs ranging from 10% to 50% on dozens of nations, a gesture reminiscent of a child throwing a tantrum in a department store. JPMorgan Chase notes the average tax on U.S. imports has since climbed to 16%, a figure that would make even the most ardent protectionist blush. “Foreign nations will finally be asked to pay for the privilege of access to our market,” Trump declared, as if tariffs were a subscription service for national pride.

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Yet the arithmetic does not flatter his vision:

  • In October 2025, U.S. companies and consumers absorbed 82% of the tariffs, according to Goldman Sachs. By July 2026, this figure is expected to remain stubbornly at 75%. Foreign exporters, it seems, are not footing the bill. The cost, as ever, is passed to the least mobile.
  • The Institute for Supply Management (ISM) reports U.S. manufacturing activity contracted in December, marking the 10th consecutive decline. Susan Spence of the ISM Manufacturing Business Survey Committee cited “uncertainty caused by tariff costs.” A manufacturing renaissance, it appears, is a concept as extinct as the dodo.
  • The Bureau of Labor Statistics (BLS) reveals a ratio of unemployed persons to job openings of 1.1 in November, the highest since 2021. Monthly job openings averaged 7.4 million through November, the lowest since 2020. One might infer that the labor market is politely declining into obsolescence.

The grand irony, of course, is that these tariffs-meant to resurrect American industry-are instead strangling it. The Tax Foundation estimates they could reduce GDP by 0.5% over the next decade. A modest toll, perhaps, but one that grows more burdensome with each passing quarter.

The S&P 500’s Cyclically Adjusted Warning

The S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio reached 39.9 in December, a figure last seen in October 2000 during the dot-com crash. Since its inception in 1957, the index has exceeded 39 in only 25 months. Such lofty valuations, one might argue, are less a sign of prosperity and more a prelude to reckoning.

Time Period S&P 500’s Best Return S&P 500’s Worst Return S&P 500’s Average Return
Six months 16% (20%) 0%
One year 16% (28%) (4%)
Two years 8% (43%) (20%)

History, that fickle oracle, suggests the index will fall 4% by December 2026 and 20% by December 2027. Investors may cling to the hope that AI will rescue margins and accelerate earnings growth, but Trump’s tariffs could dim even this flickering light. Goldman Sachs notes that 82% of tariff costs are borne domestically, a burden that will likely erode corporate profits whether absorbed by margins or passed to consumers.

Prudent Measures for the Discerning Investor

The stock market, as history so generously reminds us, is headed lower over the next two years. Prudent investors might contemplate the virtues of cash reserves, the elegance of divesting in securities that no longer inspire confidence, and the strategic purchase of only those equities that provoke unshakable conviction. After all, as Waugh himself might quip, the future belongs to those who prepare for it with a wry smile and a well-stocked emergency fund. 🧨

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2026-01-09 11:38