The stock market chaos on tariffs may damage the economy

This time, maybe stock market that economy.

After President Trump launched a global trade war, financial markets all over the world fell. S&P 500 fell more than 10 percent in two days last week. Among the rumors of more tariffs and delayed rumors, he swung crazy on Monday and ended lower on Tuesday after another chaotic trade day. The stock indices in Asia and Europe also fell sharply.

Experts often warn that the stock market may have a misleading measure of the wider economy. Stock prices can act for many reasons – technological developments, changes in consumer preferences, changes in tax or interest rate policy.

But sometimes the markets carry an economic message – and in recent days they speak clearly. Investors believe that Mr. Trump’s tariffs and retaliation from US trade partners believe that higher prices, more slow growth, and possibly a global recession.

Dive stock prices may not only reflect a fear of stagnation. In addition, consumers can cause someone back to the evaporation value of their portfolios as they withdraw their spending in response.

Ryan Sweet, a predictive firm of Oxford Economics, may not be very important for a few days of turmoil of US economist Ryan Sweet. He said.

The direct effects of tariffs will be the most difficult for low and medium -income consumers that tend to spend their money on more food, clothing and other goods subject to other goods, which are less savings to isolate them at higher prices. However, market decreases will be felt by higher earnings with the disproportionate share of stocks and other investments.

These rich household peoples have played an important role in increasing consumer expenditures in recent years, as low -income households have been bored by slowing increasing prices, high interest rates and wage increase. Higher gains can now be more cautious as their investments lose value.

Tara Sinclair, an economist at the University of George Washington, said, “Today he stopped by my office and said, ‘Well, I will not be able to re -make my kitchen because my whole kitchen budget has been deleted in the stock market in the last three days.’ ‘

Rich households will not be affected by stock prices. The majority of Americans have stocks directly or through pension accounts. And the segment, which has the shares of individual companies, has increased in recent years due to the breast stock investment explosion that started during the sponge.

Mr Sweet estimates that the “reserve effect ında increases or reduced the expenditures of households in response to stock market changes – is four times before the pandemia. This makes the economy more vulnerable to market decreases.

“Hundreds of billions of dollars in potentially lost expenditures,” he said.

A decrease in spending this size will wave the entire $ 30 trillion US economy. In the midst of uncertainty on businesses, tariffs and other policies, they have already become more cautious about recruitment and investment. They mostly resisted cutting, but if sales begin to decrease, this may change rapidly.

“This is your transmission mechanism for a stagnation, M Morgan Stanley’s chief economist Michael Gape said. “Weaker demand among high -income household peoples and then businesses can enter the dismissal and typically hitting these dismissal lower and middle -income households again.”

The last Sunday moves show that these fears have increased. Technology companies, automobile manufacturers and other companies with global supply chains have been subjected to some of the biggest decreases. However, losses were not limited to companies that were most directly affected by tariffs. Airlines, hotel operators and other companies, which provide services to consumers with disposable revenues, have also fell.

Sinclair said, “What we see is hitting big companies, hitting small companies, hitting everyone,” he said.

Oil prices also fell sharply. This suggests that economic activity, including travel, transportation and infrastructure investment of investors, is likely to weaken not only in the US but also worldwide. Indeed, other countries can be more difficult, as it constitutes a larger part of export economies.

“The rest of the world is being removed more than us to global trade,” Gapen said. “It is not a great recipe for global growth. Even getting a global stagnation may be more likely than US stagnation.”

Many investors continue to optimize that Mr. Trump will reconsider his tariff plans without widespread dismissal or business failures. However, even if so, it is not clear that the damage cannot be completely back – partly, after weeks of policy reversal, corporate leaders may not be sure that the threat of the tariff is completely behind.

Sweet said, “There are many questions of businesses, and when this is the case, it is probably the most comfortable to take refuge in the shelter,” said Sweet. “They are retreating to hire and the structures are withdrawn to equipment and software investments.”