The financial health of consumers is an important indicator of the broader economy. Consumer spending represents about 70% of all spending across the economy, and steady purchases are one reason economic growth has exceeded expectations over the past few years. However, recent consumer weakness is a concern among investors worried about a possible recession.

Just like in the stock market, greater uncertainty has led to swings in the bond market. These moves, driven by tariffs and a dispute between the White House and the Fed, have pushed interest rates and bond yields higher.

While short-term volatility can often lead to unexpected results, it's important to remember that periods like these occur periodically, even if the causes are different each time. For bond investors, especially those who rely on their portfolios for income, the current environment may present both challenges and opportunities for their financial plans.

Trade tensions between the United States and China have escalated in recent weeks, with both countries implementing unprecedented tariff increases. For the moment, the U.S. has raised tariffs on Chinese goods to 145%, while China has countered with 125% tariffs on American products.

The situation is evolving quickly and continues to affect financial markets. While global tensions can create uncertainty, history shows that markets have weathered similar challenges in the past. Despite the headlines, understanding the economic relationship between these two countries can help long-term investors to maintain perspective.

Concerns that a trade war will lead to a recession have spread around the globe. The possibility of retaliatory tariffs is on investors’ minds, with China responding with counter-tariffs, increasing the odds of a worst-case trade war scenario. Markets in Asia and Europe have declined alongside U.S. stocks, and there has been a “flight to safety” as bond prices rise and interest rates fall.