Shifting Gears

On Thursday, the Nasdaq Composite posted its third consecutive red daily candle, while the S&P 500 put up its second losing session in three. On Friday morning, US equities sold off further. The base of consolidation that we, as investors, had been seeking, has clearly arrived. Does this development across US financial markets end up looking like the pause that refreshes, or has our marketplace started to price in new worries?

The question is a valid one. Since the national election in the US handed control of all three branches of the US government over to the Republican party, a market that had already priced in a certain level of economic growth and lower interest rates, went ahead and priced in the likelihood of a coming era of deregulation.

Tariffs as inflationary? Are these tariffs more than negotiatory talking points? Probably, at least to a degree. Does this add kindling to the reacceleration of inflation already under way across said economy? While there would certainly be a benefit to the middle class in terms of job creation and wage growth, all classes would feel the inflation.

The question now becomes, with President-Elect Trump's inauguration still more than two months away, do we now have to price out those lower interest rates that had been priced in? This is what hit US equity markets on Thursday and is still pressuring stocks.