Anyone wanting to invest with total confidence wouldn’t be satisfied with news out of the US overnight. First up, concerns were raised about where President Donald Trump will go with his tariffs. Secondly, inflation predictions have been elevated and unemployment falling from 4.1% to 4% was no help.

These are two reasons not to expect the Fed to deliver more rate cuts any time soon and Wall Street doesn’t like that kind of thing.

February could be tricky for stock players. One could argue: what Trump giveth, Trump could take away. That said, the S&P 500 is up 5.8% since election day in the States and I can’t see that unwinding, unless tariffs are taken wider than expected or inflation starts to rise on the back of excessive optimism about Trump reforms or excessive fears about what his tariff program might produce.

Being an investor in stocks has certainly become trickier and all most-watched market indexes were in the red overnight.

Starting the negativity was the University of Michigan consumer sentiment survey that came in much worse than forecasted by economists. The number crunchers expected a reading of 71.3 but it came in at a low 67.8.

Then the jobs report showed unemployment fell from 4.1% to 4%. While this should be seen as a good thing, it worried traders that this would keep the Fed on the sidelines longer than the market has been expecting.

This drop in the jobless rate isn’t a good sign for inflation, with the Consumer Price Index released on Wednesday.

Not helping was Amazon, which expected growth to be 5% to 9% in the first quarter, which would be the lowest growth on record for the company.

To the local story and our S&P/ASX 200 closed 0.2% for the week but is in record high territory, which, of course, makes it vulnerable to a sell-off if the US market concerns about tariffs and US inflation escalate. The Australian dollar rose 2.2% this week to 62.84 US cents, following a run of wild swings and that’s despite expectations that we could see our first cash rate cut on Wednesday.

Let’s check out the stars and strugglers that gained or lost 5% or more this week:

The Stars…

1. Domino’s surged 21.76% to $35.93 on store closure news.
2. Lynas spiked 9.93% to $6.93 on Trump tariffs for China.
3. Collins Food rose 12.38% to $8.35 on KFC sales growth.
4. Fortescue popped 5.62% to $19.72 on a good week for miners.
5. Insignia was up 5.23% to $4.63 on takeover talk.
6. Wisetech rose 9.01% to $129.90.

The Strugglers…

1. Beach Energy gave up 9% to $1.37.
2. Polynovo was off 5.72% to $1.90.

What I liked

1. Economists jumping on board tipping a rate cut from the RBA on Wednesday.
2. December retail spendingfell by 0.1% in December, which was better than expectations of -0.7%.
3. Building approvalswere 0.7% higher in December, just missing consensus forecasts of 1%.
4. Monthly CoreLogic home price figuresshowed flat growth in January, with a continued fall in capital city prices but a rise in the regions. Annual growth in prices is up by 4.3%. We needed house price growth to moderate.
5. Themonthly Melbourne Institute inflationgauge up 0.1% in January, or 2.3% over the year, with the trimmed mean up by 2.6% (the average over the last 3 months), which suggests more downside to inflation.
6. The US manufacturing ISM indexrose to 50.9 in January (above 50 means expanding activity and below 50 is contracting activity), its strongest level since September 2022.
7. The Eurozone January consumer price datashowed a fall in the monthly inflation read, with annual growth up to 2.5% and core inflation at 2.7%.
8. The Bank of England cut interest ratesby 0.25%, to 4.5%.

What I didn’t like

1. Trump tariffs on China and tariff talk generally.
2. The tariff impact on the $A, which is too low under 63 US cents. It’s 62.70 US cents overnight.
3. Talk that we’ll be slammed with a tariff, but the US has a $40 billion trade surplus with us.
4. The indirect effects of the tariffs as they hit China.
5. The Chinese Caixin PMIfor January was just in expansion at 50.1, a tad below expectations. Services was 51, also a bit below expectations and consistent with sluggish growth in the Chinese economy.

It’s all about Trump

The reasons to be positive about stocks can be seen in ‘what I liked’ above and the fact that the tailwinds for stocks outweigh the headwinds. Donald Trump and his policies were important tailwinds, but his tariff talk is starting to look like a tailwind that could become a headwind, just as inflation in the US isn’t looking as good as it was a few months ago.

What the US President decides on tariffs and the inflation reading this week could have a big impact on Wall Street. Interestingly, HSBC’s local chief economist, Paul Bloxham, who didn’t expect a cut at all this year now thinks the RBA will cut this week, partly because of the potential tariff effects on economic activity!

This from Diana Mousina at AMP is noteworthy: “Australia has little direct trade with the US. 0.5% of US imports are from Australia (see the next chart). So, any tariffs targeted towards Australia will be small but could still happen for specific commodity exports like aluminium and lithium.

“The main indirect impact to Australia from tariffs is via lower commodity to China, from any disruption to Chinese growth (as our main trading partner). A slowdown in the global economy would also be negative for Australian trade as we are a small, open economy. But in this scenario, China is also likely to push through fiscal spending to offset any economic disruption to which Australian commodities would benefit. There may also be some positive opportunities for Australian businesses to export to the US if the US pivots away from Canada, Mexico and China.

‘There is a financial market implication for Australia as well which we can already see with the lower Aussie dollar and equity market volatility.”