Smart Investor: Defensive Stocks Live up to That Name, What Tariffs Mean for the Fed and Bank Stocks Get Slammed

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This week’s highlights:

Weekly Market Update: Stocks Plunge 9.18% as Energy and Tech Lead Big Declines

Morningstar’s Take on Tariffs: Stock Impacts, Portfolio Tips, and More

Tariffs Are a Self-Inflicted Economic Catastrophe

What Do the New Trump Tariffs Mean for Fed Interest-Rate Cuts?

Consumer Defensive Stocks Live Up to That Name During Tariff Selloff

Energy Stocks Crushed by Tariffs and Falling Oil Prices

Bank Stocks Slammed as Tariffs Drive Recession Fears

The alternative headline for this article was “Brutal.”

In the span of less than two months, we’ve gone from new record highs to approaching a bear market, all thanks to President Donald Trump’s trade wars. As Preston Caldwell, Morningstar’s senior economist, wrote this week, “tariffs are a self-inflicted economic catastrophe” and he now sees a 40% to 50% chance of a recession. Grant Slade, Morningstar’s international economist based in Amsterdam, noted that “there are no winners in a trade war,” and said the most likely outcome is higher inflation and a lower standard of living.

The bloodbath was widespread but hit some sectors especially hard. Energy stocks were crushed by the combination of rising recession fears and a surprise OPEC+ production boost. Meanwhile, stocks of the largest US banks were absolutely slammed, losing upwards of 20%.

Consumer defensive stocks proved an island of stability. Bella Albrecht explains why that sector was able to live up to their name.

Trump’s tariffs have economists and investors ratcheting up the odds of a recession. That is spilling over into the bond market, where traders are boosting the chances of the Federal Reserve reducing interest rates. Sarah Hansen looks at what some analysts are saying about whether the Fed will end its rate-cutting pause.

Amid the selloff, Morningstar’s equity analysts have been combing through their coverage. We published dozens of notes this past week, way too many to highlight. But you can find these and our complete coverage here.

Lastly, Morningstar offers up some sage advice for times like these. Sarah Hansen has a look at how long-term investors can weather his market, while Christine Benz provides a to-do list for chaotic markets.

As always, be sure to visit our Markets page for our latest coverage and live stock market updates, along with our weekly calendar of key upcoming data and events.