A Word on Current Economic Volatility

There’s a significant challenge in trying to write a piece about the current state of the economy without sounding partisan, so let me begin by saying that what you are about to read is intended, not as partisan opinion, but as objective commentary. Now that we have that cleared up….

It’s Tuesday, March 10th at 8:09pm. The S&P was down 2.7% today, the NASDAQ was down an even 4%, with futures down another .75%. 

The Atlanta Fed is predicting that GDP for the 1st quarter will show that the economy shrank by an annualized 2.4%. While this will likely be revised, it stands in stark contrast to the 2.3% annualized growth we saw at the end of 2024. 

The economy may be making a significant turnaround, but it doesn’t appear to be of the sort many had hoped.

We’ve said many times that markets do not like uncertainty. 

Five weeks ago the US placed tariffs on some of its closes allies and trading partners only to rescind them a day later. Last week tariffs were reapplied only to be modified days later. Reciprocal tariffs are now going into effect. Tariffs are ultimately a tax on consumption, and represent a tax increase to consumers.

Thousands of federal employees have been fired, some frantically hired back when it was discovered their jobs were critical, such as those maintaining our nuclear arsenal. According to Reuters, another 82,000 workers are slated to be fired from the VA, alone.

Scores of government contracts have abruptly been cancelled, creating confusion and panic among the companies that held them with layoffs likely to follow for many of their employees. The courts may order that some be reinstated.

There are rumored cuts to Medicare, Medicaid, and Social Security yet to be announced. A government shutdown looms on Friday, the debt ceiling will be hit later this year triggering a series of defaults if not raised. 

Maybe there is a certain genius in all of this. Maybe there’s a grand plan and the naysayers will have to eat their words. Maybe.

If there is a plan, then it has not been sufficiently conveyed to the public. In the absence of information to the contrary, businesses appear to be increasingly working under the assumption that there is no plan, and that the multitude of changes are a function of capricious whim. Left unchecked, the resulting disruption and lack of certainty, we believe, will force businesses to adopt a more defensive posture that may include cutting production and staff, and canceling plans to expand operations. 

Tomorrow, tariffs could be lifted and markets could rebound but, until there is concise ongoing guidance, we believe volatility will continue. 

This doesn’t mean all is lost. It does mean that, during these times of uncertainty, it’s important to remember that diversification is key to helping to weather volatility, as is working closely with your Certified Financial Planner® professional to help ensure that you’re invested appropriately based on your goals and specific set of circumstances, and that you’re making changes as conditions dictate. 

We’ve had volatile markets before and, as long as the economy grows over the long-term, markets have a perfect track record of rebounding to new highs. That’s certainly no guarantee but, while we think the near-term volatility will be unpleasant, over time we expect a return to normalcy.

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs.

Sterling Manor Financial, LLC is an SEC Registered Investment Advisor and does not provide tax or legal advice, nor is it a third-party administrator. This piece contains forward-looking statements which are opinion, not guaranteed, and subject to change.