Bracing For Impact

Everyone sees what’s happening; they have for a while now. Even before all the tariff issues and government cutbacks, there were still signs that the economy was in for a downturn. To see how much, one just had to know where to look: Women.

This time last year, women were dropping hundreds of dollars on Taylor Swift tickets and merch. By August, that trend was starting to change, and by October it was largely gone altogether. Some sectors saw it sooner than others. Hair salons will tell you that not only are women cutting back on the number of times they visit, but they’ve scaled back their services, too. Many went from full hair coloring to just highlights. Others cut out color completely. Spa-like treatments, such as manicures and pedicures, are being eliminated as well.

Restaurants are another place where the cutbacks are showing. Instead of eating out four or five times a week, more women have taken to buying inexpensive meals and cooking for themselves. Sometimes roommates will pitch in together for a slightly larger meal. Gone, for now, are the days when groups of friends would meet at a pub or restaurant and drop $50 per person without regard. There are fewer parties, and the ones that still happen aren’t as big.

So when Fed Chairman Jerome Powell told reporters this afternoon that tariffs are “highly likely” to spur a temporary rise in inflation, stock markets headed downward. Why? In the 12 months that ended in February, female shoppers accounted for 60% of general merchandise sales, which includes apparel, footwear, home decor, and more, according to consumer analytics research firm Circana. Women tend to be more cautious with their spending, even if their husbands might say otherwise. That there was a 1% drop in what women spent year over year may not sound like much, but in real dollars, it represents billions.

“Women are the lion’s share of the apparel business,” says Marshal Cohen, Circana’s chief retail-industry adviser. So when he sees women driving a downturn in apparel, he says, “That signals to me that there is a pullback in discretionary spending.”

Of course, what was isn’t as bothersome as what could be. Powell said many of the administration’s policies — on trade, immigration, fiscal matters, and regulation — are still evolving. But higher inflation and slower growth are in store.

The anticipation of a greater downturn is pushing central bankers further from their goals of stable prices and a prosperous job marketpushing central bankers further from their goals of stable prices and a prosperous job market. “I do think we’ll be moving away from those goals probably for the balance of this year, or at least not making any progress,” Powell said.

Earlier this week, Fed Governor Christopher Waller described new tariff policies as “one of the biggest shocks to affect the U.S. economy in many decades.” The questions that are currently unanswerable are how large they might be and how long they could stick around. Most economists seem convinced that the market can likely handle a short-term set of tariffs, such as two weeks or a month. Beyond that, though, the road has a lot more potholes, and recovery becomes more difficult.

But there are other concerning markers on the Fed’s dashboard, too. Retail sales jumped in March, with economists attributing the rise to consumers panic-buying before tariffs take hold. Industrial production fell in March, the first decline in four months. Stocks have also flashed red since President Punk kicked off the trade war.

Knowing all this, no one is surprised when LVMH, the luxury fashion conglomerate, posted a loss and lowered expectations for the rest of the year.  Chipmakers Nvidia and AMD said in company filings that Punk’s recent executive orders would result in major write-downs of the value of chips. Nvidia and AMD both saw their share prices fall roughly 7 percent in trading.

It takes two full months of severe downturns before a recession is declared. Hold on to your nickels and dimes, friends, all the signs say we’re headed in that direction as fast as the administration’s errors can take us.