'It feels like the market wants to find a bottom': Local economists reflect on stock market's roller coaster day

BROOKFIELD, Wis. (CBS 58) -- An extremely volatile Monday on the stock market kept a spotlight on concerns over how the sweeping new tariffs President Donald Trump announced last week will affect the U.S. economy. 

Brian Petersen, chief economist at Brookfield-based Annex Wealth Management, said Monday's roller coaster ride on the stock market was another test of President Trump's assurances steep tariffs will eventually benefit the American economy.

"President Trump says that it's going to be great. The market seems to be having a different opinion on that," Petersen said. "So, who's going to be right? And over what timeframe?"

Monday morning, the markets briefly rebounded sharply from last week's nosedive that followed President Trump announcing the details of his tariff plan, which included a 34% tariff against China and 26% tariffs against Japan and India. A 20% tariff on the European Union is already affecting Milwaukee businesses.

The market's positive movement seems to have been based on social media posts claiming the Trump administration will pause the tariff policy for 90 days. The White House flatly rejected any reports of a pause, and the markets responded by dipping back down.

"It feels like the market wants to find a bottom somewhere close to where we are here and just move on with things," Jacobsen said of Monday's tumultuous movement. 

While the markets seemed to be seeking reasons for optimism, Rebecca Neumann, an economics professor at UW-Milwaukee, said she had a hard time seeing how the U.S. avoids a recession if the Trump administration commits to its new tariff rates.

Neumann, and many other economists, have expressed skepticism at "reciprocal" trade rates that appear to be based on the nation's trade deficit with other countries.

Both Neumann and Jacobsen said the U.S. might import more items from a country than they buy from the U.S. for a variety of reasons, and the size of a trade deficit alone isn't a sound basis for adjusted tariff rates.

Beyond that, Neumann warned automation and AI will keep a number of manufacturing jobs from ever reappearing in the U.S. She said she's most concerned U.S. exporters could be forced to lay off their own workers if a trade war cools demand abroad. She said Americans also facing higher prices on imported goods could form a double-whammy that results in a recession.

"I don't see a lot of long-term that this actually improves the economy," Neumann said. "I see a lot of the short-term pain, and I'm worried this is gonna turn into a much longer-term pain, where prices start to go up, unemployment starts to rise."

Neumann said while President Trump had run on a platform of raising tariffs, the actual new rates are far higher than economists expected.

She said the goal of having more products made in the U.S. could make sense for specific essential items, pointing to the supply chain disasters during the worst of the COVID-19 pandemic. However, Neumann noted the Trump administration hasn't offered specifics on which types of product production would be coming back from abroad.

"If you want to make an argument that some of those things should be produced in the U.S. from a national security standpoint, make that argument," she said. "But this overwhelming just slapping on tariffs and saying, 'Oh, we're gonna bring back all these manufacturing jobs,' I don't know what that looks like."

Stock suggestions? Don't do anything drastic

One school of thought is people can grow their stock market earnings by buying low on companies whose prices have dropped over the past week. Jacobsen agreed there could be good deals out there, but he cautioned investors should do plenty of research and do not attempt to get rich off a market that's in turmoil.

"Trying to time the market is a fool's errand, as far as when to get in and when to get out," he said. "Especially during volatile periods."

Jacobsen added that regardless of whether someone plays the stock market, or even whether they have a 401K, his biggest piece of advice is for people to have a plan for building some savings in case the economy does dip into a recession.

"What do I have for cash management purposes to get me through six months, maybe 12 months of spending?" he said. "If you don't have that in place, I think that can cause a lot more anxiety."