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This is a cross-post from METAR on the TMF boards. Click on the link for active links in the post that are below my sign-off.

https://discussion.fool.com/t/control-panel-increa...

Many actions of the new Trump administration have dramatically increased economic risk and uncertainty. These include deporting undocumented workers and beginning a trade war on important trading partners who are bound to retaliate.
nytimes.com – 9 Mar 25
Undocumented Workers, Fearing Deportation, Are Staying Home

Fearing roundups, many immigrants are staying home. Construction, agriculture, senior care and hospitality employers say labor shortages will worsen.
A Chill Sets In for Undocumented Workers, and Those Who Hire Them

Fearing roundups, many immigrants are staying home. Construction, agriculture, senior care and hospitality employers say labor shortages will worsen.
By Rebecca Davis O’Brien and Miriam Jordan, The New York Times, March 9, 2025

…
Fear has gripped America’s undocumented workers. Many are staying home.

The impact is being felt not only in immigrant homes and communities, but also in the industries that rely on immigrants as a source of willing and inexpensive labor, including residential construction, agriculture, senior care and hospitality. American consumers will soon feel the pain.

“Businesses across industries know what comes next when their work force disappears — restaurants, coffee shops and grocery stores struggling to stay open, food prices soaring, and everyday Americans demanding action,” said Rebecca Shi, chief executive of the American Business Immigration Coalition.

An estimated 20 percent of the U.S. labor force is foreign born, and millions of immigrant workers lack legal immigration status… In construction, up to 19 percent of all workers are undocumented…low-skilled labor for poultry plants, warehouses and manufacturing…farm labor…long-term care for older adults and people with disabilities… [end quote]

The trade war will hit essential levels of the economy from energy to consumer goods to construction and manufacturing inputs. The war on immigrants will hit many essential jobs that American workers won’t do at all, certainly not for the low wages accepted by immigrants.

This will slow the economy and raise costs at the same time. Stagflation.

I wrote earlier this week about an economic cold front approaching. This post has several comments and links so I don’t have to post them again.

I usually wait to post economic indicators on my Sunday Control Panel post. But these seem too timely to wait. This reminds me of the time my family was out fishing and my dad raced for harbor after seeing an approaching cold front. The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.8 percent on March 3, down from -1.5 percent on February 28. After this morning’s releases from the US Census Bureau and the Institute…

The Fear & Greed Index is in Extreme Fear. The risk panel is strongly risk-off as SPX is falling while the 10 year Treasury price is rising. VIX has risen (though not yet to crisis level). Bullish percent has dropped. The Naz has dropped. USD has dropped back into its channel beginning in 2023.

Gold and copper are both rising. Oil is stable in its channel but natgas is rising.

The stock market is still in a bubble. The small drop in the indexes just blew a little froth off the top and aren’t yet a substantial so-called “correction.”

Stock investors are responding to these fears by shifting away from the high-flying “Magnificent 7” to dividend-yielding stocks in addition to gold and U.S. Treasuries.

https://www.wsj.com/finance/stocks/dividend-stocks...

The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -2.4 percent on March 6, up from -2.8 percent on March 3. After recent releases from the Institute for Supply Management, the US Bureau of Economic Analysis, and the US Census Bureau, the nowcasts of first-quarter real personal consumption expenditures growth and real gross private domestic investment growth increased from 0.0 percent and 2.5 percent, respectively, to 0.4 percent and 4.8 percent, while the nowcast of the contribution of net exports to first-quarter real GDP growth fell from -3.57 percentage points to -3.84 percentage points.

While the Atlanta Fed’s model has correctly predicted higher GDP growth than the “Blue Chip Consensus” it is now well below that consensus.

The Cleveland Fed’s Inflation Nowcasting predicts Quarterly annualized percent change of CPI for 1Q25 will be 3.91%, with no drop in CPI or PCE (regular and core).

All inflation measures are well above the Federal Reserve’s 2% target. Fed Chair Powell reiterated this week the FOMC’s intention to hold steady on the fed funds rate as long as the labor market and economy are strong. As usual, speculators are front-running the Fed and predicting more fed funds cuts in 2025 instead of listening to Powell. This always leads to market volatility when they are disappointed.

Financial conditions are still very loose but have tightened slightly in the past week. The Chicago Fed’s National Financial Conditions Index (NFCI) provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems. This has a greater impact on commercial and consumer borrowing than the Treasury yields.

The METAR is for increasing cloudiness trending toward rain. A cold front is moving in. It’s not clear yet whether the rain will be relatively calm or whether the increasing uncertainty of constantly-changing economic stress from the administration will cause a sudden storm in the markets.

Wendy

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CandleGlance | Free Charts | StockCharts.com

Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
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CandleGlance | Free Charts | StockCharts.com

Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
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CandleGlance | Free Charts | StockCharts.com

Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
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Dynamic Yield Curve | Free Charts | StockCharts.com

Visualize the relationship between interest rates and stocks over time using our draggable, interactive yield curve charting tool.
atlantafed.org
GDPNow

Provides a
clevelandfed.org
Inflation Nowcasting

The Federal Reserve Bank of Cleveland provides daily “nowcasts” of inflation for two popular price indexes, the price index for personal consumption expenditures (PCE) and the Consumer Price Index (CPI). These nowcasts give a sense of where inflation...
CNN
Fear and Greed Index - Investor Sentiment | CNN

CNN’s Fear & Greed Index is a way to gauge stock market movements and whether stocks are fairly priced. The index uses seven market indicators to help answer the question: What emotion is driving the market now?
Multpl
Shiller PE Ratio - Multpl

Shiller PE Ratio chart, historic, and current data. Current Shiller PE Ratio is 36.34, a change of +0.21 from previous market close.
chicagofed.org
National Financial Conditions Index: Current Data - Federal Reserve Bank of...
fred.stlouisfed.org
St. Louis Fed Financial Stress Index

St. Louis Fed Financial Stress Index

https://www.cmegroup.com/markets/interest-rates/cm...

Thanks for cross-posting your METAR report, Wendy. It appears the temperature has dropped and clouds have moved in. Storm clouds on the horizon? Entirely possible. I'm taking some steps to prepare myself to take advantage of cheaper burgers in the days ahead. In my case, burgers being small cap value (SCV) stocks that I want to accumulate.

They are already a decent buy, a little below average valuation, IINM, but if I believe a thesis of challenging economic times ahead, with plenty of chaos and uncertainty, interacting with the broader stock market being at very high valuation to produce a stock market downdraft that will take the SCV stocks down with them, producing a good buying opportunity in a potentially short amount of time.

Regarding those valuations: S&P 500 CAPE is a very high 36.5, and S&P 500 Excess CAPE Yield a low 1.7, both indicating high relative valuation.

A 20% drop in the S&P 500 is likely be matched or exceeded by SCV, since it's typically a more volatile sector. Say we get a 25% drop in prices of SCV from average valuation, that would produce a pricing that would need to gain 33% to get back up to average valuation, that's a pretty nice bounce to be able to expect.

It wouldn't be unlikely for the S&P and SCV to go down quite a bit more than that, but it's enough of a discount to make good returns highly likely in the intermediate & long term. The S&P 500, meanwhile, will need to drop in half to get to "average", but it seems like average has just kept climbing through my investing lifespan, starting in the mid '90s. Back then the long term average of PE-10y aka CAPE was about 15, now it's 17, and the average since 1990 is 18.6. I can't say I expect the S&P 500 to have such a brutal bear as to take CAPE down into the teens, an almost 50% drop from here, but it's entirely possible. And if that happens, SCV will likely lose as much or possibly even more, creating a compressed spring of high value for that sector going forward.

This is all somewhat speculative, so it's not like I'm selling my large cap stocks, for the most part, but I'm scrounging up money to put in the market if we do get a serious downdraft.

One large cap that I did sell recently was KMX, which failed to execute a turnaround from the post COVID blues during an acceptable time frame for me. I'm toying a little bit with lightening up a small amount on my BRK, as it's up there on the rich side of its valuation lately, but I try to resist the urge to trade stocks as it more often than not doesn't do so well for me.

I'm toying a little bit with lightening up a small amount on my BRK

If there’s a general market swoon (and there is, and will be) Berkshire will also take a hit, but it will be far smaller than the general market, and it will give the company the chance to deploy their massive cash hoard at (finally) reasonable valuations. I read (on the Berkshire board) that its beta is *far less* than the market (in this recent round, and basically forever) and is likely to survive any major downturn better than most any other.

I have major slugs of it in 3 separate accounts (main, my IRA and hers) and it’s the one thing I haven’t - and won’t - touch as the market crumbles.

[BRK] is the one thing I haven’t - and won’t - touch as the market crumbles.

That's a laudable approach, sir. I salute you.

However, I don't know about you, but I believe there's something to the Fama/French findings that there is often a premium return from small cap vs. large and value vs. growth, in the long term. Maybe not, but I think so. It fits with behavioral economics.

So I try to keep a small cap value (SCV) index, or similar (DFSV), as a foundation stone in my portfolio, Berkshire has a similar spot.

It's not too often that I've been very confident that I see an exploitable situation in the markets, but I think it's happening now, and the pivot is from large caps to small caps, growth to value. My main vehicle for large caps is BRK, my main vehicle for SCV is DFSV, there seems to be a trade to be had. And I'm gearing up to move all available cash funds for investment into DFSV.

I need to spend some time with the reports for all my stock holdings and decide what can fruitfully be moved to the SCV play.

What can you share, Goofy, what signs you will be looking for to time your move into the market?

Mungo has a bottom indicator that seems useful.

https://wellsfargo.bluematrix.com/links2/html/4cd1...

Wendy

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