US lost 92k jobs in February

The average US tariff rate has increased from 2.6% in 2025 to 13.7% in 2026, effectively acting as a large tax on imported goods. This significant increase in tariffs raises costs for businesses and consumers, squeezing margins and reducing disposable income, which disproportionately harms smaller, more domestically-focused companies that are less able to absorb these costs compared to large multinationals. The tariff-induced economic drag is likely to hit small-cap companies (represented by IWM) the hardest, making them a candidate for a short position as the economy weakens. The government could reverse the tariff policies. Small-cap stocks could rally if the market anticipates a Fed pivot to easier monetary policy in response to the economic weakness.

The US economy unexpectedly lost 92k jobs in February, and the labor force participation rate fell to a multi-decade low (excluding the pandemic). This negative economic data, combined with rising energy prices, signals potential for a broader economic slowdown or recession, which would negatively impact corporate earnings and stock market valuations. The author remains "fully invested" but advises caution and risk management, implying a neutral-to-bearish outlook on the overall market. The recommendation is to hold existing positions but be prepared for volatility, making it an "AVOID" for new capital until there is more clarity. The market could interpret bad economic news as a signal for the Federal Reserve to cut interest rates, which could be bullish for stocks. This single data point could also be an anomaly or subject to future revisions.

The speaker notes that the US has attacked 8 different countries in the past year, "including several in oil rich regions." Geopolitical instability and military conflict in oil-producing regions create supply-side risks, which typically drive up the price of energy commodities. The heightened geopolitical risk in oil-rich areas suggests a potential for continued or increased energy price volatility, making the energy sector (represented by XLE) a key area to watch for bullish price action. A swift resolution to conflicts, a global economic slowdown depressing demand, or an increase in production from non-conflict regions could cause energy prices to fall.