AE Wealth Management: Market Minute — Fed comments push markets down
Fed comments push markets down
What should have been a quiet week for investors (at least from a data perspective) has turned out to be anything but as markets moved down on Wednesday.
The primary party pooper this time is Federal Reserve Chair Jerome Powell, who addressed the Economic Club of Chicago early Wednesday. “Tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be persistent,” he told the group. “Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored.”1
Powell’s comments pour water on the idea that we’ll see interest rate cuts sooner and put Powell in the backseat once again. It’s also the second time in a month that Powell has commented on the tariffs without any data and soured the markets.
The markets chose to ignore a few comments hinting at slower economic growth, which would actually be a nod to lower rates. Powell said as much on April 4, commenting, “While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected … The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”2 Maybe he needs to be quiet until he gets some actual data — like jobs (which were still good) and two months of inflation data (which has been on the decline).
Markets were already reeling on Wednesday as tariffs took effect on some NVIDIA chips, and Powell’s comments simply pushed them over the edge. The Nasdaq dropped 4.26% for the day, while the S&P 500 and Dow declined 3.16% and 2.33%, respectively.3,4,5
Despite today’s sharp declines, it’s important to remember that short-term volatility is a normal part of long-term investing. Headlines and comments — especially those lacking relevant data — can spark temporary reactions, but they don’t define your financial future. If you’re feeling uneasy or want to revisit your portfolio strategy, talk to your advisor. Staying patient and focused on your long-term goals is the best way to navigate uncertain times.
1 Courtenay Brown. Axios. April 16, 2025. “Trump’s tariffs ‘highly likely’ to reignite inflation, Fed chair Powell says.” https://www.axios.com/2025/04/16/trump-tariffs-inflation-powell-interest-rates. Accessed April 16, 2025.
2 Howard Schneider. Reuters. April 4, 2025. “Fed’s Powell says larger-than-expected tariffs likely to boost inflation, slow growth.” https://www.reuters.com/markets/us/feds-powell-weigh-amid-tariff-fray-market-drop-2025-04-04/. Accessed April 16, 2025.
3 Yahoo! Finance. “NASDAQ Composite (ˆIXIC).” https://finance.yahoo.com/quote/%5EIXIC/. Accessed April 16, 2025.
4 Yahoo! Finance. “S&P 500 (ˆGSPC).” https://finance.yahoo.com/quote/%5EGSPC/. Accessed April 16, 2025.
5 Yahoo! Finance. “Dow Jones Industrial Average (ˆDJI).” https://finance.yahoo.com/quote/%5EDJI/. Accessed April 16, 2025.
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