Separating signal from noise

It was a crazy day, capping a crazy week for markets — and it may perfectly encapsulate a new era for investors.

• The big picture: The confident AI trade that drove stocks higher in 2024 has firmly given way to fears of slowing growth and possibly recession, fueled by unpredictable policy and an escalating trade war.

The morning kicked off with the first full jobs report of the Trump era, which showed healthy hiring last month, offering some initial relief for nervous investors.

• But that relief was short-lived. Upon deeper inspection, the report proved to be mixed, showing signs of underlying softness in the labor market.

By midday, jittery investors had driven down the S&P 500 by 1.8%, just around the time Trump was ratcheting up the heat on Canada from the Oval Office, threatening reciprocal tariffs on lumber and dairy products "as early as today."

• And then just like that, stocks bounced back.

The reason? Fed chair Jerome Powell gave some measure of assurance about the health of the economy, preaching patience in evaluating the impact of fast-moving trade policies.

• "As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves," he said. "We do not need to be in a hurry [on interest rate changes], and are well-positioned to wait for greater clarity."

The bottom line: That will be the challenge for investors — if weeks like this one become the norm.