Wall Street holds its breath

Summary

Marketplace Morning Report: "Wall Street Holds Its Breath" – March 11, 2025

In this episode of the Marketplace Morning Report, host Sabri Ben Asore delves into the current state of Wall Street amidst ongoing economic uncertainties, the impact of the Trump administration's tariff policies on the market, and reflects on the lasting economic effects of the COVID-19 pandemic. Featuring expert insights from Nova Sapphos and Pavlina Chernova, the episode provides a comprehensive analysis of the factors influencing today's financial landscape.

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Market Overview: Calm Amidst Turbulence

The episode opens with Sabri Ben Asore addressing the cautious sentiment prevailing on Wall Street. Following a significant downturn where the Nasdaq experienced its steepest decline since 2022 and the S&P 500 plummeted by 2.5%, investors are now eagerly awaiting new economic data that could shed light on the economy's health.

"Markets are a little calmer this morning. Investors are looking forward to new data out later that might offer some relief or at least some more information about the health of the economy."
— Sabri Ben Asore [00:29]

Despite yesterday's sharp declines, morning futures indicated a tentative recovery, suggesting that the market is attempting to stabilize ahead of important economic indicators.

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Trade War Escalation: Tariffs Under Scrutiny

Sabri engages in a detailed discussion with Nova Sapphos regarding the Trump administration's tariff policies and their repercussions on the market. The administration has been downplaying the market's negative reaction to tariffs, attributing recent economic slowdowns to temporary factors and projecting a swift return to growth fueled by upcoming tax cuts.

"Recession concerns over tariff policies are overblown,"
— Kevin Hassett, Director of the National Economic Council [01:10]

However, Nova highlights that retaliatory tariffs from China and new actions from Canada have intensified the ongoing trade war, counteracting the administration's optimistic outlook.

"Retaliatory tariffs are kicking in from China today. Some new actions also from Canada as well."
— Nova Sapphos [01:28]

The conversation shifts to the disproportionate impact on tech stocks, particularly the so-called "Magnificent Seven" — a group of leading technology companies that have driven much of the stock rally in recent times. Sabri probes why these stocks are bearing the brunt of the sell-off, to which Nova explains that the decline in sales, especially for companies like Tesla amid Elon Musk's high-profile role in the White House, is a significant factor.

"It's getting pummeled because sales are down significantly ever since Elon Musk took up a high profile role in the Trump White House."
— Nova Sapphos [01:51]

Additionally, the investor sentiment has shifted away from riskier investments tied to future technologies like artificial intelligence, leading to a reversal of previous gains in stocks such as Nvidia.

"A lot of the Magnificent Seven rally has been bets on the future having to do with artificial intelligence. So some of those investments are now getting reversed."
— Nova Sapphos [02:03]

This segment underscores the fragile state of the tech sector and the broader market amidst geopolitical tensions and shifting investment priorities.

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Reflecting on the Pandemic: Economic Lessons Learned

Transitioning from market dynamics, Sabri marks the five-year anniversary of the WHO declaring COVID-19 a global pandemic. He introduces Pavlina Chernova, President of the Levy Economics Institute at Bard College, to discuss the enduring economic impacts of the pandemic and the effectiveness of government responses.

Government Relief and Public Expectations

Pavlina explores how the pandemic catalyzed unprecedented government mobilization of resources, enabling rapid development of vaccines, expansion of telehealth services, and provision of various subsidies.

"We were able to really mobilize the public resources... to develop obviously, vaccines. We offered telehealth. We offered, you know, various other subsidies."
— Pavlina Chernova [03:54]

However, she notes that these protections were fleeting, with many Americans subsequently grappling with high healthcare costs and limited access to essential services.

Effectiveness of Relief Payments and Structural Issues

The discussion then shifts to the debate over the efficacy of relief payments. While these payments provided immediate financial support, critics argue they may have contributed to inflation. Pavlina emphasizes that income support alone does not address deeper structural issues within the labor market.

"Income support doesn't increase the minimum wage. You have to have minimum wage legislation to do that. You have to have legislation to provide benefits for working people."
— Pavlina Chernova [04:45]

She points out missed opportunities to implement more transformative measures, such as extending expanded child tax credits or providing substantial student debt relief. The rise in homelessness and persistent housing issues further highlight the inadequacy of temporary income support in resolving long-term economic challenges.

Preparedness for Future Crises

When questioned about the nation's readiness for future crises, Pavlina expresses cautious optimism. She believes that while lessons have been learned about the importance of swift fiscal action and the role of the public sector in mobilizing resources, the current political climate remains a significant hurdle.

"If we are faced with major crises, we need to be looking to the fiscal side. We need to be looking to Congress for swift action."
— Pavlina Chernova [06:00]

She underscores the necessity for more surgical and long-term solutions to address labor market issues, such as increasing the minimum wage and providing essential benefits, to prevent recurring economic disparities in the wake of future emergencies.

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Closing Remarks

As the episode concludes, Sabri Ben Asore summarizes the key insights from his discussions. The market remains volatile amidst geopolitical tensions and lingering economic uncertainties rooted in the pandemic's aftermath. The importance of addressing structural economic issues has been underscored, highlighting the need for comprehensive policy measures over temporary relief efforts.

For listeners seeking to deepen their understanding of these complex economic dynamics, the episode provides valuable perspectives from industry experts, setting the stage for informed discussions on the evolving financial landscape.

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Notable Quotes:

• "Markets are a little calmer this morning. Investors are looking forward to new data out later that might offer some relief or at least some more information about the health of the economy."
  — Sabri Ben Asore [00:29]

• "We were able to really mobilize the public resources... to develop obviously, vaccines. We offered telehealth. We offered, you know, various other subsidies."
  — Pavlina Chernova [03:54]

• "Income support doesn't increase the minimum wage. You have to have minimum wage legislation to do that. You have to have legislation to provide benefits for working people."
  — Pavlina Chernova [04:45]

• "If we are faced with major crises, we need to be looking to the fiscal side. We need to be looking to Congress for swift action."
  — Pavlina Chernova [06:00]

This episode of Marketplace Morning Report offers a thorough examination of the intertwined forces shaping Wall Street and the broader economy, providing listeners with a nuanced understanding of current financial challenges and the policy responses needed to navigate them.

Transcript

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[Sabri Ben Asore]

Wall street holds its breath. From Marketplace, I'm Sabri Ben Asore in for David Brancaccio. Markets are a little calmer this morning. Investors are looking forward to new data out later that might offer some relief or at least some more information about the health of the economy. Yesterday the Nasdaq had its steepest drop since 2022. The S&P 500 tumbled 2.5%. But so far this morning, futures are on their way back up. Marketplaces. Nova Sapphos here with more.

[Nova Sapphos]

Hi Nova, good morning.

[Sabri Ben Asore]

So the Trump administration is discounting the market's reaction to its tariff policies, but tariff policies have driven a big chunk of the tumble. So what's the latest from the White House about how they're going to move forward?

[Nova Sapphos]

Well, it seems to be full steam ahead for now. Kevin Hassett, director of the National Economic Council, told CNBC that recession concerns over tariff policies are overblown. We've seen multiple data points suggesting the economy is slowing. But Hassett said the same thing that other members of the administration and the president too have suggested and that is that the this is all temporary and that tax cuts to come will drive growth again. Meanwhile, retaliatory tariffs are kicking in from China today. Some new actions also from Canada as well. Sabri so the trade war is in full swing.

[Sabri Ben Asore]

Markets don't seem that convinced of the administration's argument so far. But why is it that tech stocks are taking the brunt of the sell off here?

[Nova Sapphos]

Right. It's a bit of a has to do with what we've had so far, the so called Magnificent Seven stocks which powered so much of the stock rally. Look at one of those stocks. It's tests Tesla. It's getting pummeled because sales are down significantly ever since Elon Musk took up a high profile role in the Trump White House. Also, overall, investors are reducing their exposure to riskier investments overall. And a lot of the Magnificent Seven rally has been bets on the future having to do with artificial intelligence. Think Nvidia. So some of those investments are now getting reversed. Sabri.

[Sabri Ben Asore]

All right, Nova, thank you so much.

[Nova Sapphos]

You're welcome.

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[Sabri Ben Asore]

This week marks five years since the World Health Organization declared COVID 19 a global pandemic. Economic realities seem to change almost overnight as the virus spread. And despite a very strong recovery, we are still dealing with some of the consequences. Inflation is still on its way back down, for example. To take a look back at some of the enduring economic marks left by the pandemic, we're joined by Pavlina Chernova. She's president of the Levy Economics Institute at Bard College. Welcome.

[Pavlina Chernova]

Thank you for having me.

[Sabri Ben Asore]

We did get new and expanded forms of government relief and service during the pandemic. Did any of that stick or really did that change at all what Americans expect from their government?

[Pavlina Chernova]

We were able to really mobilize the public resources, and I'm talking about financial resources, research capabilities, administrative structures. We were able to mobilize them to, you know, develop obviously, vaccines. We offered telehealth. We offered, you know, various other subsidies. And so I think people understood for a brief moment that this was possible. And those protections then disappeared and they were left to struggle with high healthcare bills and the kind of difficulty to access healthcare. As one example, there were and are.

[Sabri Ben Asore]

Differences of opinions on the effectiveness of some of the things the government did. For example, relief payments. On the one hand, they provided much needed relief to people. On the other, people say that they contributed to inflation. I'm wondering what mistakes did we or could we learn from from an economic perspective?

[Pavlina Chernova]

I mean, I think the first lesson is that income support relief payments clearly can be dispersed on short order. But I think what it also demonstrated is that just income support doesn't really address the fundamental structural issues that we're discussing here. Income support doesn't increase the minimum wage. You have to have minimum wage legislation to do that. You have to have legislation to provide benefits for working people. And I think this is where we missed an opportunity to think very deeply about transforming the labor market. There was, I think, a missed opportunity on extending the expanded child tax credits. We could have tried different types of student debt relief when student debt cancellation didn't work. We've seen homelessness increase, you know, thinking about housing issues. And so I think that income was the expedient thing to do, but it was not a transformative thing to do.

[Sabri Ben Asore]

Well, if there is you know, political disagreement about whether to keep some of the measures we took to help people along through the pandemic. Are we better or worse prepared for knowing what to do next time something crazy like this happens?

[Pavlina Chernova]

I hope we're better prepared. I mean, one important lesson is that if we are faced with major crisis, we need to be looking to the fiscal side. We need to be looking to Congress for swift action, and it is the public sector that can mobilize the resources. Clearly we're working in a political environment that is quite antithetical to increasing public investments, an environment in which public administrative structures that acted very effectively during the COVID pandemic are being under attack. So we have a lot of work ahead of us. But in terms of economic policy, I would say a lesson would be the fiscal arm is the one that can act and it needs to act, perhaps in a more surgical way, to improve in a long term manner the problems in the labor market, increasing minimum wage, providing essential benefits, dealing substantively with the accelerated health care costs, child poverty. These are the sorts of things that we saw even during the last election. I think these were the lessons that we can be learning going forward.

[Sabri Ben Asore]

Pavlina Cernova is president of the Levy Economics Institute at Bard College, where she's also a professor of economics. Thank you so much.

[Pavlina Chernova]

Thank you so much for having me.

[Sabri Ben Asore]

In New York, I'm Saree Benishore with the Marketplace Morning Report from APM American Public Media.

[Janelie Espinal]

Consumer confidence had its sharpest monthly decline since 2021, which means we're all in our feels about money. And while uncertainty is the only constant these days, it's also a great reason to get serious about understanding personal finance. I'm Janelie Espinal, host of Financially Inclined, a podcast from Marketplace that makes learning about money simple. Learn about practical skills like negotiating job offers, dealing with money and friendship and love, entrepreneurship and student loans. Get serious about your money and build a life you've always dreamed of. Listen to Financially Inclined wherever you get your podcasts.