Dismal Outlooks from Nike & FedEx Raise Tariff Worries: March 21, 2025

Stocks are suffering further sharp losses as Wall Street and corporate America become increasingly concerned that widespread tariffs will weigh on top lines while pressuring costs. Emblematic of this angst were disappointing profit outlooks from the likes of FedEx and Nike, companies that are especially in the crosshairs of global quarrelling and thus highly susceptible to margin compression pressures. And on a quiet day for the stateside economic calendar, foreign government peers released unpleasant figures related to retail sales, prices and sentiment. Weaker-than-expected consumption from Canada, stronger-than-projected inflation in Japan and sluggish consumer confidence in Europe highlighted the uncertainty plaguing investors, businesses and policymakers alike. Taken together, though, the publications substantiate recent monetary policy accommodation measures in Frankfurt and Ottawa as well as the wait-and-see approach illustrated by Tokyo’s pause. Still, market participants worry that a reacceleration in goods charges may impede central banks from easing lending rates in response to growth fears.

Investors Diversify Beyond US Equities

Today’s sharp equity declines occur after yesterday’s intra-day bearish reversal, as the buy-the-dip mantra has proved ineffective year to date. But what has worked in 2025 has been scooping up drawdowns in the fixed-income space, and traders are reaching for more safe-haven Treasurys this morning, which have outperformed stocks by a wide margin. Market participants are also gravitating toward IBKR ForecastTrader Contracts that offer speculative, hedging and arbitrage opportunities and are immune from the turbulence of traditional asset prices. Additionally, European shares have seen strong interest, as investors incrementally turn away from the US for the time being and enjoy softer valuation metrics across the Atlantic. Folks are also looking ahead to fiscal stimulus in the continent that may support risk assets, as officials look to strengthen military capabilities considering that geopolitical agitation from the East is incentivizing heavy levels of government borrowing.

Stocks Drop Following Yesterday’s Bearish Reversal

All major, stateside equity benchmarks are much lower on the session, with the Russell 2000, Dow Jones Industrial, S&P 500 and Nasdaq 100 losing 1.1%, 0.8%, 0.7% and 0.7%. Sectoral breadth is deeply negative and every segment is down today. Leading the way south are materials, industrials and real estate, which are trimming 1.8%, 1.1% and 1%. But Treasurys and the greenback are catching strong bids, as investors reach for risk-off assets amidst stronger US relative performance prospects driven by weak data from overseas. The 2- and 10-year maturities are changing hands at 3.93% and 4.23%, 4 and 1 basis point (bps) softer, while the Dollar Index gains 18 bps. The US currency is appreciating against all of its major counterparts, including the euro, pound sterling, franc, yen, yuan, loonie and Aussie tender. Commodities are taking a beating in consideration of the growth concerns with silver, gold, copper, lumber and crude oil lessening by 1.9%, 1%, 0.9%, 0.1% and 0.1%. 

Trump 1.0 Comparison?

A key differentiator between the potential trade war and the disputes from President Trump’s first term is magnitude. This time around, tariffs are expected to be much more widespread and not just centered on China, generating greater tensions and weighing on global growth prospects. Another important consideration is that the Commander in Chief isn’t eligible to run for the Oval Office again in 2028, which raises the tolerance for economic weakness and asset price volatility. Meanwhile, moving toward fiscal balance is an absolutely necessary endeavor, as the nation can’t afford to kick the can down the road forever, with politician after politician leaving the challenges of government spending reductions to someone along the line. Finally, probabilities from our IBKR ForecastTrader suggest that President Trump has less than two years to enact sweeping changes to downsize the public sector, as our prediction market displays 65% odds that the democratic party will win a majority in the House of Representatives during the 2026 midterm elections.

International Roundup

Canada Sales Drop Again

Canada retail sales dropped 0.4% month over month (m/m) in February after sinking 0.6% in January, fueling concerns that consumers may be bracing for a potential trade war. At the same time, consumption has weakened significantly following the end of the country’s tax holiday in December, when retail transactions climbed 2.6%.

Japanese Prices Fall

Deflation hit Japan in February with the country’s Consumer Price Index (CPI) dropping 0.1% m/m after climbing 0.5% during the first month of 2025. On a y/y basis, meanwhile, the headline and core CPI climbed 3.7% and 3%, decelerating from 4% and 3.2% in January. The core figure was expected to climb 2.9%. Additionally, the deceleration from January is attributed to the country resuming fuel subsidies.