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Tariffs factor in because they are inherently inflationary, raising the costs of goods and impacting corporate bottom lines. Corporate earnings reports have been trickling in so far, and they have been widely getting punished badly for misses. Those who have reported an average 3.8 percent share price decline on reporting, according to Bespoke Investment Group.
Earnings season kicks into a gear Friday with the big Wall Street banks.
"What the market is really about, is about inflation," Cohn said. "The Fed will get to where they squash inflation, but it's going to take time and the market is going to be another flatline in 2019."
The tariff situation, in the meantime, will be a significant obstacle in a variety of sectors.
Moody's Investors Service is warning that the back-and-forth between the U.S. and China will impact investments and raise tensions. The ratings firm predicts that "significant sector and regional impacts are likely, including unintended consequences on domestic supply chains."
"Elena Duggar, chair of the Moody 's Macroeconomic Board, said in a statement. "Moving production chains will be costly and rising uncertainty will affect investment."
U.S. retail and wholesale distributors of furniture, home goods, electronics, hardware and appliances, the ratings agency said. In addition, the impact of tariffs in the manufacture, transportation, telecommunications and machinery manufacturing industries.
Finally, Moody's added, particularly semiconductors.
"That's significant, but it's not happening yet. "The specter of it is enough for people to go 'wait a minute.'"
Markets took another beating Thursday, with the Dow industrials off more than 500 points in late-afternoon trading as investors.
"While tensions over extended protectionism have been raised, US-China tensions have escalated," Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said in a statement. possible, but so is escalation. "
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