Market Turbulence and the Business Cycle: A Quick Macroeconomic Snapshot

 This week’s sharp decline in U.S. stock markets over 700 points in the Dow and nearly 2% off the S&P 500 offers a real world glimpse into key macroeconomic forces at play.

The main driver: inflation. February’s core PCE index rose 2.8% year-over-year, fueling fears that the Federal Reserve may tighten monetary policy. In macro terms, this represents a potential shift from expansion to contraction, as higher interest rates reduce investment and slow growth.

Layered on top of inflation is uncertainty from newly announced tariffs. A 25% tax on imported cars acts like a negative supply shock raising costs, reducing output, and pushing the economy closer to stagflation. This shifts the short run aggregate supply curve left, increasing inflationary pressure while slowing GDP growth.

Consumer confidence is also dropping, which lowers aggregate demand. If households expect a downturn, they may cut back on spending creating a self-fulfilling slowdown.

In short, this moment ties together several key themes from our course: inflation dynamics, policy responses, supply shocks, and how expectations influence the business cycle. Watching the economy unfold in real time reinforces the importance of understanding national income and its fluctuations.

https://www.cnn.com/2025/03/28/investing/us-stocks-tariff-uncertainty-volatility/index.html

Copper Prices Surge Amid Tariff War and Global Demand

Tariffs and AI Are Driving Up Prices

Copper prices have surged to record highs, fueled by a combination of trade tensions, supply chain disruptions, and the increasing demand for critical metals in energy infrastructure. As the U.S.-China trade war intensifies, President Donald Trump’s proposed 25% tariff on copper imports has prompted American buyers to stockpile the metal, pushing prices up by 30% this year. Meanwhile, China, the world’s largest copper importer, is rolling out a stimulus program that could further increase demand, adding more pressure to an already tightening market.

Why Copper and Other Metals Matter More Than Ever

Copper is the backbone of modern infrastructure. It plays a vital role in everything from power transmission lines and batteries to LED lights and electric vehicles. The global shift toward clean energy, including solar and wind power, has already been driving up demand. However, there’s another major factor on the horizon: artificial intelligence.

AI’s Growing Need for Energy Infrastructure

The rapid expansion of AI technology is putting unprecedented strain on data centers, which require massive amounts of electricity to function. As companies invest in AI-driven applications, they’re also ramping up their energy consumption. This, in turn, increases the need for more efficient power grids, stronger transmission lines, and advanced cooling systems—all of which rely heavily on copper.

In fact, the International Energy Agency (IEA) expects copper demand to rise by 20% by 2030 and by 41% by 2040, as clean energy and AI continue to expand. Other metals, such as lithium and silver, are also becoming increasingly valuable due to their role in energy storage and electronic components.

Winners and Losers in the Copper Boom

Mining companies like Freeport-McMoRan and Southern Copper are already seeing gains as copper prices climb. But for industries that rely on the metal—such as construction, electronics, and manufacturing—the rising costs could mean tighter margins and higher prices for consumers.

• Construction: Copper is a key material in home wiring and plumbing. With prices soaring, homebuilders are facing increased costs, which could worsen inflation in the housing market.

• Electronics & Appliances: Everything from smartphones to refrigerators contains copper. Higher material costs may lead to more expensive consumer goods.

• Renewable Energy: Solar panels and wind turbines require significant amounts of copper. Rising prices could slow the transition to clean energy if production costs become too high.

The Future of Precious Metals and Energy Infrastructure

As AI technology and clean energy solutions continue to evolve, the demand for copper and other precious metals will only increase. While trade policies and supply chain challenges may cause short-term price fluctuations, the long-term trend points to a world that is more dependent on these metals than ever before.

Whether through tariffs, economic shifts, or technological advancements, the price of copper will remain a key indicator of how the global economy adapts to the needs of the future. For businesses, consumers, and governments alike, the challenge will be balancing demand with sustainability—and finding ways to secure these critical resources in an increasingly competitive market.

Article Link: https://www.usnews.com/news/business/articles/2025-03-26/copper-prices-have-soared-as-the-us-threatens-tariffs-on-the-metal-and-china-boosts-its-economy

Consumer Confidence Plumets

 U.S Consumer Confidence Plumets to 12-Year Low

The Consumer Confidence Index was released this past week in March. The index significantly declined, dropping 7.2 points to 92.9, marking the lowest level since early 2021. This is the fourth consecutive month that the index has decreased. Along with the consumer confidence decreasing, so did the expectations index, which is consumers' short-term outlook. 

Factors Contributing to the Decline

1. Tariff concerns

1. The new tariffs and their anticipation have raised economic uncertainty. Consumers and businesses are concerned about the tariffs and their impact on spending and earnings. 

2. Inflation

1. Constant inflation is part of eroding purchasing power over time. As recent articles stated, the consumer can expect it to rise to around 6.2%. Thus raising rental rates and affecting overall consumer sentiment.

3. Labor Market Concerns

1. Unemployment is not a concern due to its all-time low, but the main concern is the unease about job security. People look at their job landscape from an opposing viewpoint, which lowers consumer trust in their spending. 

Indexes’ Decreased Impact on the Economy

• Reduced Consumer Spending

• Retail Sector Strain

• Increase in Misery Index

• Combines Inflation and Unemployment rates

Conclusion

The index's decline challenges the U.S. economy, but concerns are piling up while the labor market remains strong. People are looking to address the issues to restore confidence and sustain economic growth. 

NBC Link

CNN Link

The probability of a recession is approaching 50%, Deutsche markets survey finds

    The chances of the United States entering a recession have increased to a 50%/50% chance, according to a Deutsche Bank, raising more questions about the direction of the United States. Although unemployment has remained low, data points suggest the continuing of slow growth, and the probability of a downturn over the next twelve months is about 43%. Jerome Powell, the Federal Reserve Chair, claims that the economy is "strong overall," but he and his colleagues lowered their GDP growth estimate to 1.7% and raised the outlook for core inflation to 2.8%. The combination of higher inflation and growth began to decline, raising concerns regarding stagflation. In recent weeks, markets have been nervous, and bond expert Jeffery Gundlach at DoubleLine Capital forecasts a  50% to 60% recession to occur. A recent stock market decline was driven by uncertainty over U.S. tariff policies, raising fears of a potential economic slowdown or stagflation. Barclays expects only modest economic slowing, projecting just 0.7% growth for the year. Meanwhile, UCLA’s Anderson Forecast issued its first-ever “recession watch,” citing Trump’s tariffs as a key risk. Economist Clement Bohr warned that unless tariff threats are reduced, the U.S. could face a deep and possibly stagflationary recession.

    Overall, the current state of the economy is not looking good. On one hand, low unemployment and steady consumer spending offer some reassurance. On the other hand, rising inflation, slower growth projections, and uncertainty around trade policies make both economists and investors nervous. So much so that talks about stagflation are a possible concern. The future of the economy is uncertain, and only time will tell what will happen. 

The probability of a recession is approaching 50%, Deutsche markets survey finds

Major Infrastructure Investments in the U.S. Since November 2024

Since President Donald Trump re-entered office in November 2024, the United States has experienced a surge in infrastructure investments across various sectors, including technology, manufacturing and energy. These initiatives aim to bolster economic growth, enhance energy security, and position the U.S. as a leader in emerging technologies. 

Schneider Electric's $700 Million AI Investment

- Schneider Electric has announced plans to invest over $700 million in the U.S. by 2027 to enhance energy infrastructure critical for AI advancements. This investment includes upgrading and opening facilities in states such as Tennessee, Massachusetts, Texas, Missouri, Ohio, and the Carolinas, and is expected to create over 1,000 jobs. The initiative underscores the growing demand for robust energy infrastructure to support AI technologies.

Johnson & Johnson's $55 Billion Commitment

- Johnson & Johnson announced plans to invest over $55 billion in the United States over the next four years, including the construction of four new manufacturing plants. This commitment represents a 25% increase compared to the previous four years and is expected to have an economic impact of more than $100 billion annually.

Amazon's $10 Billion Investment in Ohio Data Centers

- Amazon has committed an additional $10 billion towards expanding its data center operations in Ohio, bringing the total expected investment in the state to over $23 billion by 2030. This expansion is part of Amazon Web Services' strategy to support growing AI demands and is accompanied by significant job creation.

Sources

https://www.reuters.com/business/schneider-electric-invest-over-700-million-us-power-ai-boom-2025-03-25/?

https://apnews.com/article/3afc1b68dd0ba09242b5d56a0e2eb86d?

https://www.businessinsider.com/amazon-invests-10-billion-ohio-data-centers-energy-concerns-2024-12?

The probability of a recession is approaching 50%, Deutsche markets survey finds

    A Deutsche Bank survey was taken recently and showed there is a 50-50 chance the U.S. could enter a recession within the next year, with 43% predicting a downturn. Although reports are showing low unemployment and strong numbers, there is a concern about a recession, but Federal Reserve Chair Jerome Powell acknowledging these worries while stating that the economy is still “strong overall.” However, the GDP growth forecast was changed down to 1.7%  for the year, which is the lowest growth since 2011, and even raised the inflation forecast as well which is predicted at 2.8%, higher than the Fed's target. The mix of high inflation and slow growth has brought up the talk of stagflation.

    With all these concerns, the market outlook has become a little nervous for investors, with a bond expert stating the likelihood of a recession at 50-60%. As I mentioned before, analysts warn that the U.S. may be headed toward stagflation. While some people like Jerome Powell don't believe there is a likelihood of a severe stagnation, firms like Barclays and UCLA Anderson are forecasting a slowdown. UCLA has said they are in a "recession watch" for the first time, explaining there are concerns about President Trump's tariffs and the possibility for a recession or stagflation if the administration continues to create policies that will only hurt ourselves.

Link: https://www.cnbc.com/2025/03/24/the-probability-of-a-recession-is-approaching-50percent-deutsche-markets-survey-finds.html

Trump pledges auto, pharma tariffs in ‘near future,’ sowing more trade confusion

 President Trump announced Monday, soon he will be announcing tariffs targeting autos and pharmacuticals as well as other sectors. This follows their recent announcement of steel and aluminum tariffs. Trump claims to announce pharmaceuticals because he says "we have to have pharmaceuticals". Trump also announced Monday that there are plans to add lumber and semiconductor industries to his list saying tariffs would come down the road. Trump also states at the same event that the reciprocal tariffs "may give a lot of countries breaks".  Trump states that these tariffs are going to be imposed on April second but many people are skeptical. With all of the different tariffs President Trump has proposed it is hard for consumers to have any certainty, as well as investors in the market there is a lot of uncertainty. As we have learned in class if these tariffs are announced we will begin to see almost immediate reaction from the economy, resulting potentially higher prices for consumers in auto and pharmaceuticals. 

https://www.cnbc.com/2025/03/24/trump-tariffs-autos-pharmaceuticals-sectoral-reciprocal.html

  

Trying to Keep Hospitals from Inflating America's Healthcare Bill

    The cost of healthcare in America is a major worry, and most of the costs fall onto hospitals. They account for almost one-third of overall healthcare spending, taking $1.5 trillion in fees in 2023—double that of medications. Hospital costs have grown more than 250% since the year 2000, nearly twice the pace of inflation. This is in great part due to the fee-for-service system, by which hospitals bill for every test and procedure, regardless of necessity. Despite efforts to shift to value-based care, payments are still largely made under this outdated system, keeping costs high.

    Consolidation of hospitals has also contributed to the problem. Hospital chains have grown by merging with other institutions, giving them more leeway to set higher prices without necessarily improving the care provided.  Private equity firms have also entered the hospital industry, sometimes making money-focused decisions that prioritize profit over patient well-being. Although they do not own many hospitals, studies have found their presence lowers the quality of care. Medicare and private insurers pay extra for hospital services compared to independent doctors' offices.

    Attempts to reform the system persist, such as new legislation requiring hospitals to be more transparent with prices. Some legislators are also advocating "site-neutrality" policies, in which Medicare would pay the same regardless of where a service is delivered. There are even some investors and technology companies that are looking at how to disrupt the sector and lower costs. But for the time being, the U.S. hospital system is still a major contributor to high healthcare costs, with many patients facing costly and challenging medical bills. 

How hospitals inflate America’s giant health-care bill. (2025, March 20). Business | For all they care. Retrieved from [URL] https://www.economist.com/business/2025/03/20/how-hospitals-inflate-americas-giant-health-care-bill

President Trump Announces Tariffs on Countries that Buy Oil and Gas from Venezuela

 President Trump announced on Monday that any countries that buy oil and gas from Venezuela will have a 25% tariff imposed on them. The tariffs will cover any trade the country has with the US and will take effect on April 2^nd. Last year, Venezuela exported around 660,000 barrels per day, with China being the main destination for the crude exports. The US was the second largest destination for Venezuelan crude exports. Analysts see the announcement as another action from the Trump administration putting pressure on China as well as an effort to increase pressure on the Venezuelan government lead by President Maduro. In the announcement on Monday, President Trump accused Venezuela of sending gang members to the US.

https://www.cnbc.com/2025/03/24/trump-says-any-country-that-purchases-oil-from-venezuela-will-have-to-pay-25percent-tariff-on-trade-with-us.html

Tax revenue collected by the IRS set to plummet, report says

 The IRS and Treasury Department anticipate a more than 10% drop in tax revenue by April 15, potentially exceeding $500 billion, due to shifting taxpayer behavior and cuts at the IRS under President Donald Trump, according to the Washington Post. The decline is attributed to more individuals and businesses avoiding or failing to file taxes. Thousands of IRS jobs are expected to be cut as part of Elon Musk’s Department of Government Efficiency spending reductions, which experts warn could hinder tax enforcement during the busy season. The IRS has also reported increased online chatter about tax avoidance strategies. However, the Treasury Department dismissed the report as “sensational and baseless.”

link-https://www.cnbc.com/2025/03/24/tax-revenue-collected-by-the-irs-set-to-plummet-report-says.html

CNBC Daily Open: Tariff flexibility sounds good, but also signals uncertainty

  https://www.cnbc.com/2025/03/24/cnbc-daily-open-tariff-flexibility-could-also-mean-uncertainty.html

The article points out how the unpredictable yet flexible tariff policies of the Trump administration are keeping businesses and investors in the dark. Although the administration is eager to safeguard local industries, the uncertain direction has caused issues for most companies to plan their strategy.This unpredictability is making companies cautious, which is leading them to hold back on investments and expansion plans. Uncertainty can slow down economic growth as companies hold back from taking risks if they are uncertain about the terms of trade in the future. The government needs to make the guidelines clearer and more consistent to create a stable economic situation that would boost investment and confidence in the business community.

Stock Market Slips as Tariff Concerns Weigh on Economic Outlook

On March 21, 2025, U.S. financial markets faced a notable decline as investors reacted to growing concerns over President Trump's latest round of tariffs. The Dow Jones Industrial Average fell over 400 points, while the S&P 500 and Nasdaq recorded losses. These market moves follow recent announcements of increased tariffs from Canada, China, and Mexico, key trade partners for the U.S.

Investor Uncertainty on the Rise

The tariffs have created unease among investors, many fearing higher imports could hurt corporate points and spark inflation. Companies that rely on global support chains are especially vulnerable, with sectors like manufacturing, automotive, and consumer goods already feeling the strain.

Economic Indicators Sending Mixed Signals

This market dip coincides with a broader shift in economic sentiment. The Federal Reserve held interest rates steady in March amid slower GDP growth and elevated inflation. With tariffs potentially amplifying cost pressures, the Fed may be forced to maintain higher rates longer than expected.

Looking Ahead: Trade Policy and Market Stability

Economists warn that continued tariff escalation could damage global trade relationships and affect consumer prices. If companies pass costs onto consumers, spending could slow, adding more pressure to an economy already adjusting to a post-pandemic environment. The situation highlights how closely tied U.S. trade policy is to financial markets and overall economic health. As investors watch for the administration's next move, all eyes remain on how the Fed, businesses, and consumers will respond in the months ahead.

Article: Investors are taking cover as economic concerns grow By Alain Sherter

Source: https://www.cbsnews.com/news/today-stock-market-down-news-trump-tariffs-3-21-2025/