Markets Brace for Stagflation Risks as Tariffs Add Inflationary Pressure

Concerns over stagflation are growing as fresh U.S. tariffs push up costs while economic activity slows. With the latest round of import tariffs on Chinese and European goods, businesses are passing on higher prices to consumers, just as economic growth begins to stall. The combination of rising inflation and slowing output has investors worried that the U.S. economy could be heading into a stagflationary cycle. The S&P 500 continues to decline, with analysts pointing to the 10% market correction as a reflection of broader concerns about economic stagnation.

Adding to these economic headwinds, homebuilding activity has slowed significantly. Recent data shows that housing starts and building permits have declined for the third consecutive month. Higher borrowing costs, supply chain disruptions, and reduced consumer demand are weighing on new residential construction. Homebuilders are now scaling back projects, with many citing uncertainty about interest rates and economic conditions. The slowdown in homebuilding is raising concerns about its potential knock-on effects on employment and the broader economy.

All eyes are now on the Federal Reserve, which is set to make a policy announcement later today. Markets widely expect no change in interest rates, but investors are eager for any signals about future rate cuts or economic outlook adjustments. Recent inflation data suggests price pressures remain persistent, and with the economy slowing, the Fed will need to strike a balance between supporting growth and keeping inflation in check. Traders will be closely watching Jerome Powell’s language for any clues about the Fed’s stance on rate adjustments in the coming months.

Amid the market downturn, gold continues to hold firm - even pushing a touch higher, proving its resilience as a safe-haven asset. While stocks are tumbling, gold prices have remained stable, reflecting investors’ flight to security. Despite broader market weakness, demand for gold remains strong, with institutions like J.P. Morgan and BlackRock reaffirming their bullish stance on the metal. The ongoing economic uncertainty and inflation fears are keeping gold in favour, reinforcing its role as a hedge in volatile markets.

Market Indicators to Watch

• Federal Reserve Interest Rate Decision – Wednesday, 20 March 2025, at 5:00 am AEST
• U.S. Retail Sales Data – Thursday, 21 March 2025, at 11:30 pm AEST
• Australian Unemployment Rate – Thursday, 21 March 2025, at 11:30 am AEST
• China GDP Growth Rate – Friday, 22 March 2025, at 1:00 pm AEST

Gold daily chart, with 200MDA

Silver daily chart, with 200MDA

US500, with 200MDA

ASX200, with 200MDA