Good morning investors. Media headlines would suggest that inflation is about to come roaring back, but rising prices isn’t the greatest risk with a trade war. More on that below. Was this email forwarded to you? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

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Price growth isn’t the main story

 Americans are bracing for inflation, but the greater risk could be a slowdown. 

The New York Fed Survey of Consumer Expectations for March, released Monday, showed respondents now expect inflation to hit 3.6% over the next year, up half a percentage point from February and the highest print since October 2023.

That can largely be attributed to tariff uncertainty. 

Dig deeper, though, and the story seems to be less about runaway prices and more about an economy falling flat. 

The survey showed three- and five-year inflation expectations — more zoomed-out snapshots — are steady and falling at 3.0% and 2.9%, respectively. Those numbers don’t exactly betray an entrenched inflation panic. They reflect an uncertain short-term horizon. 

It’s worth noting, too, that the reported March inflation data came in at 2.4% year-over-year, below the forecasted 2.6%, and saw its first month-over-month decline since May 2020. 

More telling than the inflation data is how Americans feel about the labor market. 

The perceived chance of losing a job rose to the highest level in a year, per the New York Fed, while the mean probability for higher unemployment jumped to 44% for the first time since April 2020.

The Fed data doesn’t capture inflation anxiety. It’s economic unease. 

The inflation expectations for food, rent, and medical care ticked up, but those for gas, education, and home prices cooled.

In effect, consumers expect certain essentials to cost more, but they’re also preparing to spend less overall. 

And while tariff-fueled price scares have become a popular narrative, they could be overdone.

That’s what Yardeni Research strategists told clients this morning.

Global disinflationary forces like China’s export glut and weakening consumer demand could very well blunt the impact of trade barriers. 

In Yardeni’s view, there’s a chance tariffs do more to dent growth than fuel inflation.

Markets don’t seem to buy the inflation panic either. 

“Long-term inflation measures — including the difference between 10-year nominal and TIPS yields as well as swaps for the period five to ten years in the future — have sunk toward levels consistent with the Fed’s 2.0% inflation target,” the Yardeni Research team wrote in a note early Tuesday.

As much as inflation risks have dominated headlines, growth is arguably the deeper risk. 

Should uncertain, up-and-down trade policy persist, the Fed won’t only have to bring rate cuts to the table, but they might have to act faster than anyone’s pricing in. 

Market snapshot

Elsewhere:

🏦 Goldman Sachs crushed Q1 earnings. A surge in trading activity and uncertainty around Trump 2.0 helped mint money for Goldman and other banks to start the year. The firm joined JPMorgan and Morgan Stanley in reporting a bigger profit for the first quarter. Still, top execs remain on edge for the year ahead. (CNBC)

📱Meta’s antitrust case kicked off. The Federal Trade Commission says the tech giant has monopolized the social media market and should be broken up. That would entail selling Instagram and WhatsApp, undoing two of Meta’s most consequential acquisitions. (WSJ)

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About me:

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else. Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at phil@openingbellmedia.com.