Normally, financial markets would be driven by Fed action in a week when the FOMC meets. That was not the case last week. A much larger factor was investor’s fear of a trade war. Tariffs were announced against China and they responded with threats of raising tariffs of their own. A trade war,even if it is limited to China, would result in lower economic growth in the U.S. and higher inflation. The fear is that this would possibly offset the positive impact of tax reform.

Financial markets had been pricing in the benefits from tax reform and dropped by a huge amount last week when the risk of those benefits being offset were taken into consideration. Comments over the weekend indicated the announced tariffs may be part of a negotiating process and the risk of a trade war may be overblown…

ProBank Austin Advisor – March 26, 2018