President Trump saw the market getting worked up about tariffs last week and said, “Hold my beer.”
Stocks welcomed the new week by declining sharply on the heels of some not exactly reassuring comments from Trump about the state of the economy.
When asked whether he foresaw a recession this year during a Fox News interview on Sunday, Trump said, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
Translation: The recession rumors might be true.
But let’s take a step back—Trump certainly hasn’t been the only one to suggest that his administration’s policies could trigger a rough patch for the economy. Before Trump called it a “period of transition,” Treasury Secretary Scott Bessent dubbed a potential tariff-induced downturn a “detox period” from public spending on CNBC last week.
But even before that, Elon Musk seemingly said the quiet part of loud way back in October 2024. A post on X argued that the mix of Elon’s DOGE efforts, mass deportations, and curbing government spending would result in an “initial severe overreaction in the economy” before a “rapid recovery to a healthier, sustainable economy.” Elon’s response? “Sounds about right.”
Out of the frying pan, into the fire
While members of Trump’s administration are trying out different fun terms to rebrand the word “recession,” you’re probably wondering why anyone would want to purposefully crash the economy—and if there’s anything you can do to avoid being dragged down with it.
The basic logic, as author Kyla Scanlon pointed out, is that the Trump administration believes the current economic climate and geopolitical order need to be broken before they can be fixed. There’s a lot of theories as to why, ranging from political to ideological motivations, though there are a few realistic economic reasons. For instance, recessions tend to bring down house prices, and a downturn could force the Fed to finally go through with interest rate cuts, which would also likely pull mortgage rates down with them—and the combination could spur on a real estate market rebound.
Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.
The flip side: While Wall Street is certainly spooked by the tariffs, many pros are still bullish on the stock market’s ability to recover, and don’t see us heading toward a market cliff. That could make sharp declines today a buying opportunity.
“While tariff uncertainty is contributing to market jitters, the aggregate impact is more likely a moderation in growth for the economy and corporate earnings rather than an outright decline,” explained Chief of Investment Strategy & Research at Glenmede Jason Pride in a note today.
Whether the fears are overblown or not, we’re certainly in for more volatility. Pros say that playing defense is the best offense, which means moving away from flashy tech and into boring old investments like consumer staples and utility sectors. Gold is also a great hedge against chaos.
Or, as Ameriprise Chief Market Strategist Anthony Saglimbene explained, “For investors trying to navigate through the uncertainty, well-established portfolio diversification strategies, high-quality equities, cash, fixed income, alternatives, income-producing strategies, and real assets can all help mitigate risk and possibly provide a little ballast in a portfolio should near-term equity pressure continue.”—LB