If you’ve been reading this Perspective for a while, you’re probably tired of hearing all my oblique references to 80s movies and culture, but this one simply fits too well to pass up, so here goes: In the 1980 sci-fi classic The Final Countdown, a swirling blue vortex appears on the horizon in the South Pacific and sucks the US aircraft carrier USS Nimitz back in time to December 1941, where the warship’s captain and crew must decide whether or not to use their overwhelming power to stop the Japanese attack on Pearl Harbor before it happens. It’s a great movie, and you should check it out the next time lousy weather leaves you stuck in the house with nothing more than your partner, your pets, and a shared Netflix subscription.

But you’re probably asking, “How does that have anything at all to do with what’s going on in the markets?” Let me explain. First, the swirling blue phenomenon in the movie’s opening scenes — or something very much like it — actually appeared in the skies over Europe last week (see here¹ or any one of the thousands making the rounds on the internet, if you don’t believe me). The jarring sight was explained away as rocket exhaust from a recently-launched Falcon 9 interacting with the upper atmosphere, but anyone who saw that movie on first release couldn’t help but wonder if someone, somewhere, wasn’t being sucked into the past to change the course of history.

Therein lies another eerie similarity between today and Kirk Douglas and Martin Sheen’s best-ever foray into the sci-fi genre: On Wednesday, the White House announced a 25% tariff on autos and critical auto components sourced from abroad.² That, plus the growing list of import duties against China, industrial metals and so forth, could leave the average US tariff rate at its highest level since — you guessed it — the 1940s. So instead of the lumbering tub “Old Salt” and the entire ship’s company of CVN-68 being tossed smack into the middle of most fascinating paradox that time travel allows us to contemplate, maybe it was Fred Merz — who looks almost certain to become Germany’s next chancellor next month as soon as he can form a new government – being sucked into the blue vortex to correct a mistake circa 1940. After all, his auto sector arguably has among the most to lose from the new tariffs, even if Germany’s newfound fiscal freedom means those same Bavarian auto plants might soon be turning out military hardware again.³

For a third and final tie to the movie, consider the film’s title itself: The Final Countdown is as apt a description as you’re likely to find for where we sit today — squarely in the midst of the final countdown to Wednesday’s Liberation Day. That’s when the most sweeping elements of the Administration’s tariff agenda are expected to be released. That kept markets on edge all week: After a strong Monday (related, most likely, to hints from the President that his tariff proposals might be somewhat more limited in scope than originally assumed), risk assets spent the remainder of last week selling off, including a 2-3% drop by U.S. equities on Friday that registered among the biggest drawdowns so far this year.

Setting aside for now a discussion of whether tariffs represent sound long-term economic policy or not, nobody, it seems, wanted to be long the market on the weekend heading into Liberation Day. As a result, the S&P 500 Index failed what I’m told is a significant test by ricocheting off its 200-day moving average (200dMA) and then continuing lower. I’m not nearly savvy or smart enough to understand what that might mean for markets in the near future, but for a certain, technically-oriented segment of the industry, crossing below the 200dMA and staying there is considered significant.

For now, though, I’m in the camp that holds last week’s weak performance was mostly a function of the significant uncertainty that dramatic shifts in trade policy introduce into near-term decision-making for the companies upon which markets rely for direction. While dramatic changes in policy will always create winners and losers at the individual company level, far-reaching and broadly dispersed impacts are much harder to discern and usually become evident only in hindsight, years later (kind of like how the Japanese government’s decision to attach Pearl Harbor was ultimately proven to be tragic folly, but I digress...). Once that uncertainty subsides, it’s entirely possible that markets might catch a bid again and failure to hold the 200dMA will be merely an unpleasant memory.

In the meantime, economists continue to concern themselves with reading the cues provided by the data itself. As we’ve discussed for months, it’s not just corporate types that are unnerved by tariff uncertainty, but consumers as well. Last week’s consumer confidence data from The Conference Board⁴ and the University of Michigan⁵ did nothing to change that conclusion. But survey-based data is appropriately considered “soft” data because it relies on how individuals answer survey questions, and is therefore often a poor measure of actual behavior, which makes it somewhat easier to downplay. So, unless and until weakness starts to show up in “hard” data (like last week’s Chicago Fed National Activity Index [CFNAI],⁶ which was notably more upbeat than the prior week’s read provided by The Conference Board’s Leading Economic Index), optimists will still have plenty of room to make their case.

Last week’s durable goods orders release, inventory numbers, and flash Purchasing Managers’ Indices (PMI) weren’t all that bad, either (at least as long as you’re willing to look past a drop in manufacturing activity and few signs that inflation and margin compression are creeping into the script).^7,8,9 And for now, maybe the most significant bit of “hard data” pointing toward a slowdown remains the continuing surge in imports related to tariff pre-buying that promises to hollow out first-quarter Gross Domestic Product (GDP) growth when the numbers are released next month.

But anyone who entirely dismisses “soft data” as too squishy to provide much direction misses an important point about how significant the US consumer is to the health of the US economy — if the consumer is feeling queasy, they’ll eventually stay home until they feel better. That conclusion was at least partially supported by last week’s income and outlays report, which showed a big decline in discretionary spending for things like food service and accommodation, as well as a small but notable spike in the savings rate.

Besides, even soft data can pack a punch if it changes in troubling ways or becomes entrenched — like when the University of Michigan’s consumer inflation expectations ticked higher again last week, or when The Conference Board pointed out that a collapse in consumers’ own income expectations, “which had held up quite strongly in recent months,” might indicate “that worries about the business environment are translating into fears regarding (their) personal finances.”¹⁰

Sure, these are examples of soft data, but even so they should still be enough to make you wonder what’s really going on when big, blue swirling vortices start appearing in the night sky. So, keep looking up, and if you get the chance to go back in time and switch things around a little bit, you might want to at least consider the implications.

What to watch this week

It’s not exactly a national holiday (not yet, anyway), but Wednesday’s self-named “Liberation Day” has been advertised as the day when the Trump Administration will provide ultimate clarity surrounding the tariff and trade policy that has been roiling markets for much of 2025. Of particular interest will be the Administration’s plans regarding so-called reciprocal tariffs, which aim to levy trade duties in tit-for-tat fashion by slapping the same tariff rates that the U.S. trade partners slap on imports from the U.S. onto export goods bound for the U.S. The idea has a certain ring of philosophical fairness to it and it seems to enjoy broad bipartisan support, so it’s probably fair to assume that reciprocity will survive Liberation Day in some way, shape, or form.

But the devil, as always, is in the details. For example, will VAT (or “value added taxes,” which lie somewhere between tariffs and consumption taxes) become part of that calculation? If so, tariff rates may become even more restrictive than some observers have assumed. It’s of course also possible that the Administration might recognize how unsettled markets, companies, and consumers have become and provide some relief by creating significant exceptions and loopholes (or deferring a more concrete proposal to a later date.) But either way, Wednesday could represent a very significant milestone in US economic history. Expect a fair amount of market angst in the run-up as a result.

It takes a LOT to upstage the Bureau of Labor Statistics’ non-farm payrolls report (NFP) — that big burrito of labor market data which includes unemployment and participation rates, hourly earnings, and all sorts of other tasty data alongside the payrolls headline — but with Liberation Day looming, it is what it is. Still, labor market data like Friday’s NFP, Thursday’s Challenger Layoffs, and Tuesday’s JOLTS report have perhaps never been more important as they are now, with consumers and businesses each becoming increasingly uncomfortable with the state of the labor market. Tune in all week to see how things might shake out.

Further down the list (much further, maybe) are a series of releases and economic events designed to give a more ordinary glimpse into the state of economic affairs, like Monday’s Chicago PMI from Market News International and the Chicago Purchasing Manager’s Association. As one of the oldest and most-respected PMI-type surveys, Chicago PMI and the signal it provides into the future direction of the economy are worth paying attention to.

Same goes for this week’s PMIs from S&P Global and the Institute of Supply Management, with manufacturing on Tuesday and services on Thursday. As mentioned above, last week’s “flash” PMIs were mostly fine except for a few hints that cost pressures are beginning to stoke inflation for real while an imperfect ability to pass along higher costs to consumer risks denting corporate profit margins in the process. That makes the cost- and price lines inside these reports (as well as the Federal Reserve Bank of Dallas manufacturing release, scheduled for Monday), worth a close look.

But for those who prefer to get their economic outlook straight from the horse’s mouth, the Federal Reserve has billed Chairman Jerome Powell’s speech to a group of business writers and editors in Arlington on Friday as an ‘economic outlook.’ Given that it will occur mere hours after the release of Friday’s non-farm payrolls data, it could be an important speech indeed.