I hope you are well as we head into what we all hope will be a beautiful fall. Here in Asheville, we recently marked one year since Hurricane Helene devastated our region. Recovery continues, and while we still have a long way to go, it’s encouraging to see our community’s resilience and progress over these past twelve months.

As you are probably aware, yesterday was a challenging day for the markets. The S&P 500 dropped 2.7% to close around 6,500, while the Nasdaq fell 3.56% to close around 22,200. Both indexes posted their worst single-day decline since April. This brought the S&P down from the all-time highs we saw just weeks ago when the index briefly traded above 6,700 for the first time in history.

Two factors appear to be driving the market’s recent volatility. One catalyst for yesterday’s sell-off may have been President Trump’s announcement of a new 100% tariff on Chinese goods, scheduled to take effect on November 1st. This comes on top of the existing 30% tariffs already in place, potentially bringing total tariffs on Chinese imports to 130%. The announcement followed China’s implementation of new export restrictions on rare earth materials and other critical components. Trump also threatened to impose export controls on “any and all critical software” and suggested he might cancel an upcoming meeting with Chinese President Xi Jinping. This represents a significant escalation of the trade dispute between the world’s two largest economies after several months of relative calm.

The second factor to consider is that the market has been on an impressive run over the past 5 to 6 months. From the April lows around 4,982, the S&P 500 rallied more than 31% to reach its recent peak above 6,700. After such a strong advance, markets often look for a reason to consolidate gains, and the tariff news perhaps provided that catalyst. Sometimes a market that has moved higher quickly simply needs to catch its breath.

As we move into the coming weeks, I’ll be paying close attention to third-quarter corporate earnings reports. This earnings season will be particularly important because it will give us insight into how the administration’s policy changes are impacting companies. Here’s what I’ll be listening for when CEOs and CFOs speak:

  • Are companies being helped or hurt? We’ll want to hear whether tariffs, trade policies, and other regulatory changes are creating headwinds or tailwinds for their businesses.
  • Which specific policies are having the biggest impact? Some companies may benefit from certain policies while being hurt by others. The details matter.
  • What are management teams expecting for the future? Forward guidance will help us understand whether companies see the current environment improving, worsening, or stabilizing.
  • What are companies saying about employment? Hiring plans, workforce reductions, or labor cost pressures can tell us a lot about the health of the economy and corporate confidence.

The earnings reports will provide real-world data about how policy translates into business results. As I have said many times in the past, corporate earnings drive the market and it is important to understand the extent to which current policies are leading to an expansion or a contraction of corporate earnings.

As always, I’m monitoring the situation closely and will be in touch if I see anything that warrants a change in strategy. In the meantime, please don’t hesitate to reach out if you have questions or would like to discuss your portfolio.

Take care!