Is the canary in the coal mine warming up?

Two successive confidence surveys show that consumers are growing increasingly concerned about higher prices that could emerge from Trump’s implementation of large tariffs. The Conference Board survey fell the most since August 2021 and for the third straight month, across age groups and incomes. Consumers also worried about current and future labor market conditions and their present and future financial situations. The share of respondents expecting a recession in the next year rose to a nine-month high. Comments on the current administration and its policies dominated the responses. 

It's hard to miss headlines of large numbers of government workers being laid off. This began to be reflected in last week’s jobless claims, and picked up steam in this week’s, as overall claims increased from 220,000 to 242,000, though more of the increase was due to seasonal adjustments.  Perhaps more troubling for the Federal Reserve, its preferred inflation measure refused to cooperate with the plan. The Personal Consumption Expenditures Index (PCE) remains higher than policymakers would like. It grew at the same month-over-month rate in January as December, and Core PCE’s growth rose slightly, from 0.2% to 0.3%. However, both annualized growth levels retreated, from 2.6% to 2.5% and 2.9% to 2.6% for headline and core, respectively.

Uncertainty began to weigh on markets, as several high-profile corporate earnings fell a little short of lofty expectations. Over the last week, the S&P 500 index shed over 4%, while the 10-year Treasury yield fell about 0.25% and the fed funds futures markets began to price in nearly one additional Fed rate cut in 2025, all signs of concern in the markets. As usual, markets will fall back to analyzing incoming data to try to divine what the Fed will do at its next meeting on March 19.