The market came back significantly today given the jobs number, but I wouldn't hold my breath. Most everything was up, so the drivers were clearly macro. While the economic metrics are generally ‘full steam ahead”, remember that the market leads the economy.
Tariffs are still a significant issue and nothing has changed. The bottom line is that most companies are going to feel the increasing squeeze of the tariffs with each passing day. Tariffs are a slow motion disease that eventually hit both a company's and their customer's pockets.
In addition to the direct cost of tariffs, I would expect companies to incur increased expenses as they adjust their logistical infrastructure to mitigate the future threats of tariffs. These include long term projects that will begin to incur costs in the near term, but will not accrue benefits until much longer into the future. These would include factory relocations, change in sourcing contracts, creating additional supply sources, etc.
Now, the US government is warning Americans that they might not be able to return home if they travel to China. As companies try to relocate their China supply chains and sourcing, China is seeing these things evolve at the same time their economic growth is slowing. No one fights fair when their back is to the wall and China isn’t a democracy. China may not have the economic power to fight the tariffs in a traditional sense, but they can sure use other tactics such as slowing the exodus out of China.
There is likely to still be some more significant market downdrafts. I see some great bargains out there, but I'll wait for Mr. Market to turn sour again to put more cash to work.
