Tariff Uncertainty Looms

Equities were continuing to grind higher until Friday’s selloff, as the market got caught up in weaker economic data and potential tariff changes, which could shake up earnings expectations and global trade flows. While immediate action on tariffs isn’t expected until late March or early April, uncertainty is already being felt in earnings calls, as companies factor in potential disruptions to supply chains and costs. Wall Street, however, continues to favor the efficiency and budget-tightening moves out of Washington, which some counterweight to the concerns about trade policy.

On the macroeconomic front, data is becoming slightly weaker although jobless claims are coming in right on target, and GDP estimates for Q1 have settled around 2%, in line with the fourth quarter of last year. The market breadth has improved since the start of the year, a positive sign, though Growth continues to outpace Value over the long term. Tech stocks, particularly in AI, continue their remarkable resilience—NVIDIA, despite a sharp correction earlier, was just 6% below its all-time high before Friday’s selloff, a stunning recovery that underscores the persistent strength of the sector.

Looking ahead, this week’s most significant event may not be economic data but NVIDIA’s earnings call. CEO Jensen Huang’s comments will be crucial, especially regarding competition in AI chips and potential margin pressures. With new AI developments from companies like DeepSeek and concerns about future demand for chips, any sign of margin contraction in leading tech names could ripple through the market. Tesla, too, remains under scrutiny, with its recent selloff and bounce back highlighting market sensitivity to competitive pressures, particularly from China’s BYD.

Bond markets moved higher with Friday’s drop, with the 10-Year Treasury dropping to around 4.43%, 10 basis points above the Fed Funds Rate. As we move through the next few weeks, investors should remain focused on earnings strength, the trajectory of interest rates, and developments on the tariff front. While Growth stocks continue to dominate, any shift in margins or competitive dynamics—especially in AI—could create volatility. Caution is warranted as we navigate the complex dynamics ahead.