Investors hope April 2 could bring some tariff clarity and relief. That may not happen

NBC News

01-04-2025

Wall Street is hoping April 2 will provide clarity on the U.S. tariff front and a reprieve from the recent market volatility. However, many remain skeptical that any real clarity is coming anytime soon.
Stocks have been in turmoil this year, as investors struggle to price in the full breadth and depth of President Donald Trump's policies that are shifting the lines of global trade. The S&P 500 was last more than 8% off its all-time high, after falling into correction territory earlier this year. The Nasdaq Composite is more than 13% off its recent peak.
A clear-enough blueprint from Trump when he takes to the Rose Garden on Wednesday afternoon to announce his plan for reciprocal tariffs could give investors some much-needed certainty. But few expect that will be the end of it.
'Personally, I don't believe that if you just get a framework announced, no matter what it is, that's enough for a relief rally,' said Gabriela Santos, chief market strategist for the Americas at J.P. Morgan Asset Management.
'I think you need a detailed framework, and you need there to be a certain amount of tariffs on a certain amount of countries for a certain amount of time for it to be able to be digested by the economy — and ultimately by the markets, which I think have only started to price this in,' Santos said.
There is hope of an April rebound for the stock market. The S&P 500 has done well in April when it's started the month below its 200-day moving average, according to Oppenheimer technical strategist Ari Wald. Typically, it averages a 2.5% advance for the month, and it's positive 73% of the time going back to 1950.
The worst-case scenario
But investors will need some key questions answered around trade policy, in addition to some reassurance that the economic picture is not as bad as feared, for the market to truly rebound from here.
Brett Ryan, senior U.S. economist at Deutsche Bank Securities, worries that a 'maximalist' approach to tariff policy from the Trump administration — meaning a tariff on all 15 countries the U.S. has a persistent trade deficit with — would bring the average tariff rate to over 16%, from 10.5%, where he said it's currently projected to go to. In 2024, the tariff money collected as a share of total imports equaled 2.5%, according to the Tax Foundation.
For investors, that would further ding the outlook for economic growth and inflation, and raise fears of a stagflation scenario taking hold. In that maximalist scenario, Ryan expects real GDP growth will take a 1 to 1.5 percentage point hit.
Fears of slower economic growth — sparked in part by tariffs — already have market observers cutting their year-end forecasts for the S&P 500. David Kostin, chief U.S. equity strategist at Goldman Sachs, lowered his 2025 target for a second time this year, to 5,700 from 6,200.
What's clear, at least, is that Wednesday could be the start, not the end, of a long road ahead.
Christopher Harvey, head of equity strategy at Wells Fargo Securities, said he remains constructive on equities. However, he worries the risks around what the White House calls 'liberation day' are 'not small' and could lead to a recession.
'We have no inside beat on how long these new tariffs will last. We simply believe that the depth and the breadth of tariffs, and the number of stakeholders involved, creates a significant number of permutations and combinations,' Harvey wrote in a note. 'Governments, which are generally not fast moving entities, may first determine whether they want to retaliate; even if they do not, we see a long road to the negotiation table.'
'We believe the process (even under the most optimistic scenario) will require weeks/months of discussions before official changes can even be considered,' Harvey wrote. 'The bottom line is we think investors and investors' portfolios need to get comfortable with uncertainty.'