On Uncertainty, Volatility, Tariffs and More

• This week, markets experienced heightened volatility, with the S&P 500 down 3.1%, the Nasdaq off 3.5%, and the Dow dropping 2.4% - driven by uncertainty related to tariff, labor markets, and corporate earnings.

• The U.S. announced a 25% tariff on Canadian and Mexican imports, prompting retaliatory measures from both countries - and a "pause" by the U.S. These escalating trade tensionshave fueled supply chain concerns, inflationary risks, and a broader risk-off sentiment in equity markets.

The following chart presents the S&P 500 VIX Index since January 2025.  Considered a gauge of fear, theVIX moved about 20 this past week on concerns about tariffs and more.

• Separately, U.S. Federal Reserve Chair Jerome H. Powell, at a presentation in New York said,

• “Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place. The labor market is solid, and inflation has moved closer to our 2 percent longer-run goal.

• “The new Administration is in the process of implementing significant policy changesin four distinct areas: trade, immigration, fiscal policy, and regulation

• “While there have been recent developments in some of these areas, especially trade policy,uncertainty around the changes and their likely effects remains high."

Our Take

• Tariffs could reshape global trade, increase inflation and create disruptions in many industries including agriculture, automotive, consumer products, energy, technology, and retail.

• Economic uncertainty may continue as industries and consumers adjust to changing tariff environments and trade relationships.

• Heightened geopolitical tensions and policy uncertainty add risk to an already volatile market environment.